I N D O N E S I A 2004

an official handbook

NATIONAL INFORMATION AGENCY REPUBLIC OF INDONESIA

Front cover: Modern buildings of Bank Indonesia in Jakarta (front), and ancient buildings of Prambanan Temple in Yogyakarta (back)

All material contained in this book may be freely quoted provided that the source is acknowledged.

Prepared by:

Proyek Peningkatan Pelayanan Informasi Publik TA 2004 Direktorat Media Informasi Tercetak

Lembaga Informasi Nasional Jl. Medan Merdeka Barat, 9. Jakarta 10110

INDONESIA

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EDITORIAL BOARD

Supervisor : Roem Lintang Suharto Editor-in-Chief : Amsal Asagiri Managing Editor : Nana Sunara Executive Editor : Bagio Prihatono Associate Editors : Totok Saptogondo

Jamalem Subangun Sedia Barus

Writers Coordinator : Maria Sri Margini Writers : Zulfa Basier

Wiwiek Satelityowati Fasekhah Yane Erina Nusirwan Ifnaldi Jaka

Photography : Indar Ritawani Art Design & Layout : Brontho Dwiatmoko Cover Design : Suandi Tanjung Secretariat : Theresia Luciana M.M

Jose rizal iii

FOREWORD INDONESIA 2004 is the thirty-fifth official handbook in the series prepared and revised each year by the National Information Agency, a government institution dealing chiefly with operational activities in the field of information.

This 2004 edition, which covers events up to October 2004, gives a factual account of administration and the national economy of Indonesia. It features the activities of many of the national institutions, and the part done by the Government in the life of community.

This handbook does not claim to be comprehensive. But the factual and statistical information it contains has been compiled from official and other authoritative sources.

The issuance of this book is in coincidence with the inauguration of President Susilo Bambang Yudhoyono and Vice-President Mohammad Yusuf Kalla -the first President and Vice-President of the Republic who were elected by direct popular vote.

The editors sincerely hope that this book can assist the readers in keeping track of the progress of the world's largest archipelagic republic.

November, 2004 The Editors

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CONTENTS FOREWORD iv CONTENTS v LAND AND PEOPLE 1 Land 1 • Geographical Features • Climate and Weather • Rivers and Lake • Fauna and Flora • Indonesian Standard Time • Exclusive Economic Zone People 10 • Languages and Dialects • Race, Culture and Ethnic Groups • Population Growth Rate • Religions HISTORY 17

Ancient Time 17 The Period of Hindu Kingdoms 18 The Period of Islamic Kingdoms 22 European Influences 23 National Movements 26 General Elections 40

STATE AFFAIRS 49 Pancasila, the State Philosophy 49

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The 1945 Constitution 51 The National Flag 58 The Coat of Arms 58 The National Anthem 59 State Organs 60 • The People's Consultative Assembly • The Presidency • The House of Representatives • The State Audit Board • The Supreme Court • The Constitutional Court • The Regional Representatives Council • The Indonesian Presidents

REGIONAL DEVELOPMENT 79 THE LAW 85 ECONOMY 90

General Features 90 Banking 102 Insurance 105 Investment 106 Manufacturing Industry and Trade 113 Small and Medium-Scale Enterprises and Cooperatives 120 Agriculture 124 Forestry 130 Transport, Postal Services and Telecommunications 134 Mining 143 Maritime Resources and Fishery 148 Manpower 152 Tourism 158 Culture 161

POLITICAL AFFAIRS 164 Domestic Affairs 164 Foreign Affairs 168 • The Bali Concord II Information, Communications and Mass

Media 173

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SOCIAL AFFAIRS 178 Social Welfare 178 Religious Affairs 181 Education 185 Science and Technology 190 Health 194 Housing 200 Women Empowerment 203 Youth Sports, and Drug Abuse Control 206 Environment 209

DEFENCE AND SECURITY 213 Security Problems 218

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LAND AND PEOPLE LAND

Indonesia, the largest archipelago in the world to form a single state, consists of five main islands and some 30 smaller archipelagoes, totalling about 17,508 islands and islets of which about 6,000 are inhabited.

The name "INDONESIA" is composed of the two Greek words: "Indos" meaning India and "Nesos" meaning islands. The Indonesian archipelago forms a crossroad between two oceans, the Pacific and Indian oceans and a bridge between two continents, Asia and Australia. Because of its strategic position, therefore, Indonesia's cultural, social, political and economic patterns have always been conditioned by its geographical position.

GEOGRAPHICAL FEATURES

The territory of the Republic of Indonesia stretches from 6°8' north latitude to 11°15' south latitude and from 94°45' to 141°65' east longitude. Its estimated total area is 9.8 million sq km (including Exclusive Economic Zone _EEZ), which consists of a land territory of 1.9 million sq km and a sea territory of 7.9 million sq km.

Indonesia's five main islands are: Sumatra is about 473,606 sq km in size, Java 132,187 sq km, the most fertile and densely populated island, Kalimantan or two-thirds of the island of Borneo measuring 539,460 sq km, Sulawesi 189,216 sq km and Papua 421,981 sq km which forms part of the world's second biggest island of New Guinea. The other islands are smaller in size.

Kerinci Mountain, Jambi

The Indonesian archipelago is divided into three divisions. The island of Java, Sumatra and Kalimantan, together with the small islands in between, stand on the Sunda Shelf which extends from the coast of Indonesia's land area is generally covered by thick tropical rain forests where fertile soils are continuously replenished.

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Indonesia, the largest archipelago in the world to form a single state, consists of five main islands and some 30 smaller archipelagoes, totalling about 17,508 islands and

islets of which about 6,000 are inhabited.

The name "INDONESIA" is composed of the two Greek words: "Indos" meaning India and "Nesos" meaning islands. The Indonesian archipelago forms a crossroad between two oceans, the Pacific and Indian oceans and a bridge between two continents, Asia and Australia. Because of its strategic position, therefore, Indonesia's cultural, social, political and economic patterns have always been conditioned by its geographical position.

GEOGRAPHICAL FEATURES

The territory of the Republic of Indonesia stretches from 6°8' north latitude to 11°15' south latitude and from 94°45' to 141°65' east longitude. Its estimated total area is 9.8 million sq km (including Exclusive Economic Zone _EEZ), which consists of a land territory of 1.9 million sq km and a sea territory of 7.9 million sq km.

Indonesia's five main islands are: Sumatra is about 473,606 sq km in size, Java 132,187 sq km, the most fertile and densely populated island, Kalimantan or two-thirds of the island of Borneo measuring 539,460 sq km, Sulawesi 189,216 sq km and Papua 421,981 sq km which forms part of the world's second biggest island of New Guinea. The other islands are smaller in size.

The Indonesian archipelago is divided into three divisions. The island of Java, Sumatra and Kalimantan, together with the small islands in between, stand on the Sunda Shelf which extends from the coast of Indonesia's land area is generally covered by thick tropical rain forests where fertile soils are continuously replenished by volcanic eruptions like that on the island of Java. The island of Java has 112 volcanic centers of which 15 are active. The lava ejected has a high degree of fertility.

Gorgeous Uluwatu, Bali, in the evening

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An additional advantage of the island of Java is that its coastal plains are not edged by wide swamps as in the case of Sumatra, Kalimantan and Papua, not bordered by coral reefs as in the case of the island of Sulawesi. On the island of Sumatra there is plenty of evidence of past volcanic activities, although the ejected material contained acid which is of less fertility compared with Java.

CLIMATE AND WEATHER

Indonesia's climate and weather is characterized by an equatorial double rainy season. Its variation is caused by the equatorial circulation (Walker circulation) and the meridional circulation (Hardley circulation). The displacement of the latter circulation is closely related to the north-south movement of the sun and its position at a certain period with regard to the earth and the continents of Asia and Australia. These factors contribute to the displacement and intensity of the Inter-Tropical Convergence Zone (ITCZ) being an equatorial through of low pressure. This characterizes the weather of Indonesia, while the prevalence of the West monsoon and the East monsoon (the rainy and dry seasons) are characterizing Indonesia's climate.

Indonesia's monsoon-type climate changes approximately every six months although in recent years weather patterns have been somewhat disrupted as part of global changes in weather.

Land and People

Humidity and temperatures are vary according to the season but temperatures are affected additionally by time of day, height above sea level and proxim ity to the sea and exception. The dry season is from June to September and the rainy season from December to March. Intervening periods are transition months in which the weather will be mixed.

Average temperatures are classified as follows: Coastal plains: 28°C; inland and mountain areas: 26°C; higher mountain areas: 23°C, varying with the altitude.

Indonesia has an average relative humidity between 70 percent and 90 percent, with a minimum of 73 percent and a maximum of 87 percent.

RIVERS AND LAKES

Besides the great number of mountains and hills, there are still many rivers scattered throughout the country. They serve as substantial transportation means in certain islands; the Musi, Batanghari, Indragiri, and Kampar Rivers in Sumatra, the Kapuas, Barito, Mahakam, and Rajang Rivers in Kalimantan; and Memberamo and Digul Rivers in Papua. In Java, rivers are very important for irrigation means, for instance the Bengawan Solo, Ciliwung and Brantas Rivers.

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A number of unique lakes are also found in some islands. All of them are located amidst of islands, such as the Toba, Maninjau and Singkarak Lakes in Sumatra; the Tempe, Towuti, Sidenreng, Poso, Limboto and Tondano Lakes in Sulawesi, the Paniai and Sentani Lakes in Papua.

FAUNA AND FLORA

FAUNA

Within the Indonesian archipelago lies one of the most remarkable zoogeographical boundaries in the world, which dates back to the glacial period when the sea level fell worldwide. In that glacial period, Java, Sumatra, and Kalimantan lay on the Sunda Shelf and were joined to each other and to the mainland of Asia, but Papua and the Australian continent at that time, lay on the Sahul shelf. This original geographical segregation explains why the typical oriental fauna species found in Java, Sumatra and Kalimantan are completely lacking in Papua. Similarly, the marsupials, which occur in Papua, are not found in the Oriental Region.

The region between these two shelves (Maluku, Sulawesi and the Lesser Sunda Islands) has another type of fauna. The bulk of Oriental fauna does not occur in Sulawesi, although it is only 50 km from Kalimantan across the Makassar Strait, and the islands, such as Seram and Halmahera, closest to Papua, lack the major part of the latter's fauna. This may be the result of the ancient presence of a deep strait between Kalimantan and Sulawesi and the depth of the Banda Sea so that this group of islands may never have been connected with either shelf during the glacial period. Scientists represent this situation in terms of three faunal lines Wallace's (a line drawn from south to north through the Lombok and Makassar straits, ending at the southeast of the Philippines), Weber's (a line drawn and passing through the sea between Maluku and Sulawesi) and Lydekker's (a line drawn at the edge of the Sahul shelf, which skirts the western border of Papua and the Australian continent) although some of them prefer to characterize the zone itself as a "subtraction-transition zone."

Endangered one-horned rhino (Rhinoceros sondaicus) that can be found only at Ujung Kulon National Park in West Java (above), Bekantan (Nasalis larya-tus wurmb),

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belonging to the monkey species, is found only in Kalimantan and its surroundings (above), A gorgeous peacock, now this kind of bird is decreasing in number (below).

Information obtained from the paleontological record reveals that the number of species known today is much smaller in the past. The extinction of many species of animals was probably due to normal ecological and evolutionary processes related to such factors as shifting sea levels, climatic changes and habitat alterations. For example, in Java, out of at least 75 species of mammals known as fossils, 35 are extinct, 20 still survive and 20 are extinct in Java but found elsewhere in Asia. The more recent process of extinction of certain animals in Java may have been closely related to human influences on the ecosystem.

At the present stage of Indonesian social and economic development, wildlife is considered as being incapable of caring for itself. In order to safeguard and protect wildlife in Indonesia, the Directorate of Nature Conservation and Wildlife Management (Direktorat Perlindungan dan Pengawetan Alam) or PPA as abbreviated has set the target of designating about 10 percent of land as preserve areas. There are at present 320 natural preserves and natural parks in Indonesia, and more being proposed.

The PPA has adopted the modern natural conservation practice, which emphasizes the conservation of the entire ecosystem. This is necessary, as it is often not possible to preserve wildlife without its habitat. For example, the orangutan (Pongo pygmaeus), found only in Sumatra and Kalimantan, is very dependent on primary forest habitat. Therefore, to protect their habitat, the PPA in cooperation with the World Wildlife Fund (WWF) has established "Orang Utan Rehabilitation" Projects in Bohorok and in Tanjung Putting reserve, in Sumatra and Kalimantan respectively, for retraining illegally captured orangutans for life in the wilderness.

The Komodo dragon (Varanus komodoensis) which is the largest lizard in the world, reaching a length of 2 to 3 meters, has its home in the Komodo group of reserves, comprising Komodo, Padar, and Rinca Islands, eastward of Java, off the west coast of Flores.

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Due to its geographical isolation from other land masses for a longer period than the other major islands, Sulawesi has a unique fauna comprising many endemic species and many variations thereof. The babirusa or pigdeer (Babyroussa-babyroussa) and the anoa, a forest-dwelling dwarf buffalo are among the interesting endemic animals of Sulawesi. Other endemic mammals of Sulawesi are the giant pam civet (Macrogalidia musschenbroeki), the largest of all civets, a species of tarsier (Tarsius spectrum), and several forms of the Sulawesi macaque (Cynopithecus niger).

Among the many species of birds in Sulawesi, two species of the megapode birds, the maleo fowl and the Sulawesi shrubhen, are very interesting.

Papua and Maluku areas are rich in colorful birds, ranging from the great flightless cassowaries (Casuarius-casuarius) to brilliantly plumaged birds of paradise of the family Paradiseidae and Ptilinorhynhidae (more than 40 species altogether) and many numbers of the parrot family.

Other members of the Oriental fauna are the hornbills of the family Bucerotidae, which are noted for their enormous beak topped by a bony casque, elephants (Elephas indicus), roaming the forest of Sumatra and Kalimantan, the Sumatran tigers (Panthera tigris Sumatrae), and the very small number of remaining Java tigers (Panthera tigris Sondaica), the Mentawai macaquel and leaf monkey Mentawai (Macoca pagensis and Prebystis potenziani) only found on the Mentawai Islands, off the west coast of Sumatra, the small number of one-horned rhinoceros (Rhinoceros sondaicus) found only in the Ujung Kulon reserve in West Java.

Besides, many interesting animals are worthy to note, such as the banteng (Boss Javanicus), three kangaroo (Dorcopsis mulleri) from Papua, fresh-water dolphin (Orcaella brevirostris) from Mahakam River in Kalimantan and the proboscis monkey also from Kalimantan. In addition there are the great variety of birds including egrets, herons, kingfishers, hawks, eagles, and many others, thousands of species of insects, tortoises, turtles, and many kinds of lizards and snakes, and also exotic species of fishes, crabs, mollusks and other aquatic animals living both in salt and fresh water.

Some parts of the Indonesian archipelago are still unexplored and open for botanical and zoological surveys and discoveries.

Ornamental Fish

Indonesia is also known for its ornamental fish species which are now being exported to the United States, Japan, and Germany. These ornamental fish species which are known for their colorful shape and beauty include: the Amphiprion fish, the Dascyllus, the red colored Labridae and the Coris Aygula species found in plenty around the Bali strait.

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Doctor fishes or Labroidae dimidiatus are ornamental fishes, which behave like doctors, examining their patients or pecking the body of other fishes. The most common species among Indonesia's ornamental fishes are the Thalassoma lunare. The Chaetotontidae have small beaks, but the Forcipiger longirostris and the Rostratus fish are characteristic for their long snouts. The Heniches acuminatus have very long back-fins exceeding their body length and the Monish idol or Zanclus canescens can have a size of 20 cm.

Pamancanthus imperator, Pamancanthus semicirculatus, Pygoplites-diacanthus and Auxiphipos navarchus or angle fishes belonging to the Pamancanthidae families are collected because of their beautiful colors.

The Acarthuridaes and Paracunthurus hepatus fishes are very attractive due to their specific bleish color. Other attractive species are the Acunthurus-leucosternon fish, the Zebrazoma-veliverum and the Naso-literature fishes. Fishes living solitary are the Triggerfishes or Balistidaes.

Sea Horses or Hippocampus-coronatus of the syngnathidae family are also among the ornamental fishes collected in Indonesia. The Peacock fishes called so after their long fins, found in Indonesian waters are the Ptrerois-zebra, Pterois-bachiopterus, P. Volitans, P. Rusellii, P. Miles and the Radiatas, all of them belonging to the Scorpanidae family. There are still many other species of ornamental fish in Indonesia, too many to be mentioned.

Pearls Shells

Pearl oysters found in Indonesia are the Pictada maxima, Pmagaritifera and Rteria penguin species. The seas of Indonesia's eastern part around Halmahera Island, the Maluku and Aru islands are the habitat of these species.

Pearl oysters became an important marine product after the setting up of the Marine Fisheries Research Institute (LPPL) in 1960 which started to conduct research and making experiments on the cultivation of pearl bearing oysters on the island of Aru and in Sulawesi. The series of successful experiments have given rise to the establishment of several pearl cultivation companies in the country. Indonesian pearls are in great demand because of their large size and superb quality. Pearl shells are found plentifully in Maluku. People used to dive for these shells for their iridescent colors and make of them beautiful ornamental articles and jewelry.

Flora

Indonesia lies within the botanical region of Melanesia, covering the Malay Peninsula south of the Isthmus of Kra, the Indonesia archipelago; the Philippines and the whole of Papua New Guinea and Papua except the Solomon Islands. For the most part the Melanesian region is covered by the luxuriant growth of the characteristics tropical rainforest vegetation, a type of ever-wet vegetation containing a large number of timber species harboring various kinds of epiphytes, saprophytes and lianas. These characteristic

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features and the high number of genera and species endemic within this region make the flora of Indonesia completely different from that of neighboring continental Asia and Australia, as well as from the flora of other tropical areas in the world. The richness of the Melanesian region of which Indonesia represents the major portion, is reflected in the accommodation of close to 40,000 species of pants, or about 10-12 percent of the estimated number of plant species in the whole world.

Above an altitude of 1,000 m, a better development of what is normally considered temperature families can be seen, such as the Rosaceae, Lauraceae, Fogaceae, etc. Higher still, elfin or mossy forest and alpine vegetation are found, but comparatively speaking this is insignificant since the major part of Indonesian land-mass consists of lowland. As might be expected, the rich flora of Indonesia contains many unique examples of tropical plant life and manifestations Rafflesia arnoldi, which is found only in certain parts of Sumatra is the plant with the largest flower in the world; this parasitic plant grows on certain lianas but does not produce leaves.

Rafflesia arnoldi

From the same area in Sumatra comes another giant, Amorphoplalus titanum, with the largest inflorescence of its kind. The insect trapping pitcher plants (Nepenthea Spp.) are represented by different kinds of species from many areas in western Indonesia. The myriad or orchids found in Indonesia are rich in species, varying in size from the largest of all orchids, the tiger orchid Grammatophyllum speciosum, to the tiny and leafless species of Taeniophyllum used by the local people as a source of food, medicine and handicraft. The forest ground in Indonesia is so rich in litter enabling a multitude of fungi to grow luxuriantly, including the horsehair blight, the luminescent species, the sooty mould and the black mildew.

Moreover, the flora making up the Indonesian vegetation abounds in timber species. The Dipterocarp family is world famous as the main source of timber (the meranti) as well as resin and vegetable fat, tengkawang or illipe nuts. Ramin, a valuable kind of timber for furniture, is obtained from species of Gonystylus, whereas sandalwood, ebony, ulin and the kayu Palembang are taken directly from the forest. Besides, Indonesia is also known for its teakwood, a product of man-made forest in Java.

In view of the richness of the Indonesian flora it isn't surprising that the Indonesian people are depending heavily on these natural resources to support their daily life. Approximately 6,000 species of Indonesian plants are known to be used directly by the

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local people. Most characteristics in this modern time is probably the use of plants as the source of raw material for Indonesia's traditional herbal medicine (jamu) and as indispensable part in ceremonies, customs and traditions.

Indonesia Standard Time

Indonesia's three time zones are as below:

1. Western Indonesia Standard Time equals GMT plus 7 hours (meridian 105°E), covering all provinces in Sumatra and Java, and the provinces of West and Central Kalimantan.

2. Central Indonesia Standard Time equals GMT plus 8 hours (meridian 120°E), covering the provinces of East and South Kalimantan, all provinces in Sulawesi, and the provinces of Bali, West and East Nusatenggara.

3. Eastern Indonesia Standard Time equals GMT plus 9 hours (meridian 135°E), covering the provinces of Maluku and Papua.

Exclusive Economic Zone

When independence was proclaimed and sovereignty gained, Indonesia had to enact laws to govern the seas in accordance with the geographic structure of an archipelagic state. This, however, did not mean that the country would bar international passage. The laws were necessary instruments for the unity and national resilience of the country, with a territory that embraces all the islands, the islets and the seas in between.

In view of the country's susceptibility to foreign intervention from the sea and for domestic security reasons, on December 13, 1957, the Indonesian Government issued a declaration on the territorial waters of the Republic. It stated that all the waters surrounding and between the islands in the territory came within Indonesia's sovereignty. It also determined that the country's territorial water limit was 12 miles, measured from a straight baseline drawn from the outermost points of the islands.

In the past, archipelagic states like Indonesia have unilaterally determined their 200-mile-Exclusive Economic Zones. Today such economic zones are confirmed by the International Convention on the Law of the Sea, which was ratified by the Indonesian Government on October 18, 1983, by Act No. 5 of the same year. This is the legal basis of the Indonesian-Exclusive Economic Zone.

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People

Due to Indonesia's emergence into an archipelago where its inhabitants, though of one similar ancestry, were separated by seas and therefore lost contacts, have caused the individual development of cultures, including their languages and their growing into diversification.

Nevertheless, the population of Indonesia has been reclassified, not so much on the basis of their racial origins, but more so on the basis of their linguistics identities caused by mentioned diversification, into four ethnic groups. A pure classification according to their racial origins is difficult to realize due to their inter-marriages. These four main ethnic groups are the Melanesians (the mixture between the Sub-Mongoloids with the Wajaks), the Proto-Austronesians (including the Wajaks), the Polynesians and the Micronesians.

These Melanesians are again sub-divided into the Acehnese of North Sumatra, the Batak in Northeast Sumatra, the Minangkabaus in West Sumatra, the Sundanese in West Java, the Javanese in Central and East Java, the Madurese on the island of Madura, the Balinese, the Sasaks on the island of Lombok, and Timorese on Timor Island. On the island of Borneo in Indonesia's Kalimantan, one finds the Dayaks. On the island of Sulawesi in the north are the Minahasas and in the center the Torajas, and in the southern part, the Makasarese and the Buginese. The Ambonese on the group of islands in the Maluku and the Irianese in Papua are classified into the Polynesians and the Proto-Austronesians. The Micronesians are found on tiny islets of Indonesia's eastern borders.

Languages and Dialects

Languages and dialects spoken and written over the whole of the Indonesian archipelago, 150 to 250 in number are usually classified according to the above mentioned ethnic denominations. The main district local languages of Indonesia are among others: the Acehnese, Batak, Sundanese, Javanese, Sasak, Tetum of Timor, Dayak, Minahasa, Toraja, Buginese, Halmahera, Ambonese, Ceramese, several Irianese languages and other such languages. In between these languages there exist many other different dialects.

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Profiles of some Indonesian women

Ambon Bali Betawi

Riau West Kalimantan South Tapanuli

Lombok South Sumatra Nias

Indonesia's National Language has been officially introduced since Indonesia's independence and is called the BAHASA INDONESIA. Its lexicon and structure is mainly based on the Malay language enriched by Indonesia's lexicon of her multi-local languages and dialects. Although the Bahasa Indonesia has since been regarded as the Lingua Franca, yet local languages are equally valid and no attempt and intention exist to abolish these local languages and dialects. Therefore, the greater parts of the Indonesian nationals are bilingual.

In August 1973, Indonesia and Malaysia signed a cultural agreement in which similar spelling of both the Malaysian "Bahasa Persatuan" and the Indonesian "Bahasa Indonesia" has been agreed upon.

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Race, Culture and Ethnic Groups

The first inhabitant of Indonesia was the Javaman, who lived 500,000 years ago, named Pithecanthropus erectus by Eugene Dubois who found the fossils at several places on the island of Java in the vicinity of the Bengawan Solo River. The fossils found in 1891 and 1892 in the village of Trinil, near Solo, were called Homo Soloensis, while those found in Wajak were called Wajakensis. Homo Soloensis with the same characteristics as the Austro-Melanosoid people had roamed to the West (Sumatra) and to the East (Papua).

In the period of 3,000-500 BC, Indonesia was inhabited by Sub-Mongoloid migrants from Asia who later inter-married with the indigenous people. In 1,000 BC, inter-marriage still occurred with Indo-Arian migrants from the South-Asian sub-continent of India.

The influx of the Indian settlers until the seventh century AD brought about the Hindu religion spread throughout the archipelago.

Moslem merchants from Gujarat and Persia began visiting Indonesia in the 13th century and established trade links between this country and India and Persia. While conducting trade, the Gujarat and the Arab people also spread the Islamic religion in this area. The first to accept the Islam religion were the coastal kingdoms, which before had embraced Hinduism.

In Aceh, Islam was widely accepted by the community with the Pasai and Perlak Kingdoms becoming the first Moslem kingdoms in the archipelago.

First accepted by court circles, Islam founds its way to the community at a later stage. Particularly in Java, the "Wali Songo" (Islamic preachers) had played a very important role.

It was in 1511, that Portuguese arrived in Indonesia. The arrival of the Portuguese should be linked to the European demand for spices. They were followed by Spaniards, the Dutch and the British. Besides search for spices, they propagate Christianity.

In the rivalry that ensued, the Dutch ultimately succeeded in gaining the trade monopoly in spices throughout the archipelago, thus making the beginning of 350 years of Dutch colonialism over the country.

In the period preceding independence, Indonesia's community was made up of a large variety of ethnic groups or rural communities. The members of each group are tied to each other by a sense of solidarity and identity which finds its roots in the land,language, art, culture and customs they share.

There are about 500 ethnic groups in Indonesia spread from Sabang (the northernmost tip of Sumatra) to Merauke in Papua. The Javanese community is the largest number of Indonesia's total population, followed by the Sundanese, Madurese, Minangkabau,

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Buginese, Batak and the Balinese. Other ethnic groups are among others the Ambonese, Dayaks, Sasaks, the Acehnese, etc.

Apart from the indigenous communities, other sub-communities of foreign descent are the Chinese, Arabs and Indians.

POPULATION

Number, Growth Rate, and Distribution

According to the 2000 Population Census, Indonesia had total population of 205,843,000 heads _placing it the world's fourth largest after China, India, and the United States of America_ with ratio between males and females over 100, meaning more male than female in number. With population growth of 1.49 percent per annum during the period of 1990-2000, the total number of population in June 2003 was estimated at 215,276,000 heads with population density at about 111 heads per sq km.

Since its proclamation of independence in August 1945, the country has held population census for five times i.e. in 1961, 1971, 1980, 1990, and 2000. Such a census was once held during the Dutch colonialists' occupation as well but its results' accuracy were doubtful. However, its data could be used as comparative basis of reference. According to Kolonial verslag: Volkstelling 1930 (Colonial Report: Population Census 1930), at the time the total number of population of the Netherlands East Indies now called Indonesia, was 60,700,000 heads, of which 41,700,000 heads (68.7%) occupied the island of Java. The island of Sumatra accounted for only 13.6 percent, Sulawesi 6.9 percent, Nusa Tenggara 5.7 percent, Kalimantan 3.6 percent, Maluku and Papua 1.5 percent.

Population growth rate tended to decline during the past two decades. During the period of 1980-1990, population grew at an average of 1.97 percent per annum; it decreased to an average of 1.49 percent in the 1990-2000 period. This declining growth rate was parallel with the decrease of a households' number. Based on the 1990 Census, there were 39,546,000 households with an average of 4.5 heads per household. The following decade saw the total households numbering 52,008,000 with an average of 3.9 heads per household. The decline was chiefly due to the success of family planning programs starting into operation in 1970s.

In 2002, of 91,600,000 working population, some 44.34 percent worked in agricultural sector, 19.42 percent in trade, 13.21 percent in manufacturing ployees in the sectors of services, manufacturing, trade, and agriculture.industry, and 11.30 percent in services. Higher proportion of the working population in Java earned their life in manufacturing and trade rather than in agriculture. The reverse applied in other islands. Further, the remaining 27.33 percent worked as labors or employees.

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With its land area of about 6.75 percent of the country's total land area, Java accounts for about 58.83 percent of the country's total population. It means population density in Java Island is 997 heads per sq km. The Greater Jakarta, which accounts for only 0.4 percent of the country's total area, is home to about 4.01 percent of the country's total population, making its population density stood at 12,985 heads per sq km. Trailing behind is Banten with 1,100 heads per sq km. Outside Java, Bali is the most dense with 596 heads per sq pm, and North Sumatra with 162 heads. On the contrary, Papua which accounts for some 19.3 percent of the country's total area, is home to only 1.10 percent of total population, making its density of only six heads per sq km; Kalimantan (part of Indonesia), which makes up some 30.37 percent of the country's total land area, accounts for only 5.49 percent of the country's total population or with an average density of 20 heads per sq km.

In overcoming such uneven distribution of population, Indonesia had for many years introduced and carried out migration programs by moving a number of people from the densely populated islands (Java and Bali) to the sparsely populated islands (Sumatra, Kalimantan and Papua). The programs ended a couple of years ago.

Races and Ethnic Groups

The Indonesian people consist of hundreds of ethnic groups, with each group having distinct language, art, tradition and custom. Those ethnic groups politically and geographically unite into a nation, the Indonesian nation under the Unitary State of the Republic of Indonesia, with Pancasila as its state philosophy. It was during the second Indonesian Youth Congress on October 28, 1928, that the Bahasa Indonesia, the Indonesian Language, was for the first time declared as lingua franca for ethic groups residing in the territory of then the Netherlands East Indies, now called Indonesia. The event _called as the "Youth Pledge"_ was the starting point of the all ethnic groups to awake to build one nation and one motherland, Indonesia.

The island of Sumatra is home to the ethnic groups of Acehnese, the Gayo, the Batak, Malays, Minangkabauan, Jambi, Palembang etc. The island of Java is home to the ethnic groups of Betawi, Javanese, Sundanese. The island of Bali is home to the Balinese, while the ethnic groups of Lombok, Sasak, Flores and Timorese live in East and West Nusa Tenggara. In Kalimantan live in the Dayak, Banjar and Malays; in Sulawesi the Minahasans, Torajans, Bugisnese, Makassar, Mandar etc. The Asmat, Marind-anim, Dani, Yali, Korowai, Biak, Serui, Artak are ethnic groups that live in Papua.

Each of those ethnic groups has its own distinct dances popularly known among the public, such as Saman dance of Aceh, Tortor dance of the Batak, Piring dance of Minangkabau (West Sumatra), Ondel-ondel dance of Betawi, Lenso dance of Ambon (Maluku), etc.

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Each ethnic group adopts a different kinship system as well. The Bataks, for instance, adopt a patriarchal system, and bear clan names after their own surnames. The Bataks are known for their talented singers. The Minangkabauans, known as domestic tough migrants, stick to a matriarchal system.

Sundanese and Javanese are known for their industrious and tenacious labors, and their arts batik textiles are popular at home and even abroad. So are the Balinese with their particular dancing and carvings. The Bugisnese-Makassars have been known for their seafaring people with their wooden "phinisi" ships sailing high seas since hundreds years ago. Meanwhile, the people of Maluku have been known for their skillful singers and traditional music instruments, and Papuans are the country's promising athletes for the future.

It was the 1930 census that for the first time recorded the composition and number of ethnic groups in the country. This feature was dropped in the following censuses until the 1990 Census due to mainly socio-political reasons. But the 2000 Census did it again, particularly in term of quantitative data reflecting socio-political perspective changes in the country. The availability of data on each ethnic group is believed to be able to help understand them, and settle any ethnic conflict.

The 2000 Census recorded only 15 ethnic groups, among the hundreds existing ones, with ethnic members more than one million people. It also revealed different composition from that of the 1930 Census recorded.

According to the 2000 Census, Javanese people account for the greater part, namely some 41.71 percent of the country's total population. Trailing behind are Sundanese with 15.4 percent, Malay 3.45 percent, Madurese 3.37 percent, the Bataks 3.02 percent, Minangkabau 2.72 percent, Betawi 2.51 percent, Bugis 2.49 percent, Banjar 1.74 percent, Balinese 1.51 percent, Sasak 1.30 percent, Makassar 0.99 percent, Gorontalo 0.84 percent, Acehnese 0.43 percent, Torajan 0.37 percent, and others 14.66 percent. Chinese descents make up only 0.86 percent.

Composition of Main Ethnic Groups to the country's Total Population (%) No. Ethnic Group 1930 2000

1. Javanese 47.02 41.71

2. Sundanese 14.53 5.41

3. Madurese 7.28 3.37

4. Minangkabau 3.36 2.72

5. Bugisnese 2.59 2.49

6. Batak 2.04 3.02

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7. Balinese 1.88 1.51

8. Betawi 1.66 2.51

9. Malay 1.61 3.45

10. Banjar 1.52 1.74

During the period of 1930-2000, recording the highest population growth rate was the Malay with an average of 2.84 percent per annum; followed by Betawi with an average of 2.34 percent, the Batak 2.31 percent, Banjar 1.94 percent, Bugis 1.69 percent, and the Javanese with an annual average of 1.58 percent.

The majority of the Javanese people reside in Central Java, East Java, and Yogyakarta _their native land. However, they also live in Lampung (4,713,731 heads or 61.89 percent of the area's total population), in Jakarta (35.16 percent), North Sumatra (32.62 percent). The least Javanese people can be found living in West Nusa Tenggara (1.47 percent of its total population) and in East Nusa Tenggara (0.81 percent).

The Sundanese live in West Java _their homeland_, in Banten (22.66 percent of the area's total population), and in Jakarta (15.27 percent). The least percentage of this ethnic group can be found living in East Nusa Tenggara (0.03 percent) and North Sulawesi (0.08 percent of the province's total population).

Jakarta, homeland to the Betawis, and the capital of the Republic, in 2003 was home to estimated 8,640,000 people, of whom 35.16 percent are of Betawis, 15.27 percent Sundanese, 5.53 percent Chinese descents, 3.61 percent the Bataks, 3.18 percent Minangkabauans, 1.62 percent Malays, and the remaining of other ethnic groups.

Religions

Since many centuries ago the territory, which is now called Indonesia, has been an important passage of trading ships and place to call in for traders from many nations. While trading, they also propagated religious teachings they respectively adhered to local people. Hinduism and Buddhism, for example, were propagated by Indian merchants and migrants. Remnants of the two religion's glory are the monumental buildings of Borobudur Temple (Buddhist) and Prambanan Temple (Hindu) in addition to tens of smaller temples, particularly in Java. Indonesians may boast Borobudur Temple, located in Magelang, Central Java, as one of the world's marvels.

In 2000, some 1.60 percent of the country's total population adhered to Hinduism. The greater concentration of Hindus is in Bali Island (some 75.35 percent of the Island's total population).

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Buddhism is followed by some 1.51 percent of the country's total population, with their greater concentration found in the province of Bangka-Belitung (7.23 percent of the province's total population) and in Riau Province (4.18 percent).

Islam was brought to Aceh, the most northern tip of Sumatra Island, by Gujarati and Persian merchants embracing the religion, before spreading to Banten and Demak in Java Island, and other areas later on. Islam was thus developed at coastal areas first before penetrating to hinterlands. In Java in particular, the role of the nine Islamic holy men (Wali Songo) in propagating Islam was prominent. The number of followers has been increasing from time to time. According to the 1971 Census, some 87.51 percent of the country's total population were followers of Islam; and according to the 2000 Census, Islam followers accounted for 88.22 percent, or an average increase of 1.86 percent annually. This makes Indonesia a country with the largest Islam followers in the world. It is worth noting that the Istiqlal Mosque in Jakarta is the country's largest mosque, and even the largest in Southeast Asia, and the Demak Mosque one of the country's oldest mosques.

Catholicism was first introduced to this area by pastors participating in the Portuguese voyages in search of Indonesian spices. After failing to defend Malacca, the Portuguese went away to land in Larantuka, Flores. From this place Catholicism was propagated and spread for the first time to throughout the country.

Jakarta's large and beautiful cathedral is the pride of Indonesian Catholics. While Protestantism was introduced and propagated by Dutch and German missionaries, and later on by American missionaries. They initiated preaching the religion at Tapanuli (North Sumatra), Ambon (Maluku), Minahasa (North Sulawesi) and Manokwari (Papua), before to Kalimantan, Java and others. Missionaries are still active in Papua.

According to the 2000 Census, some 8.92 percent of Indonesia's total population adhere to Catholicism and Protestantism. The number of the two religions' followers grew at an annual average of 2.48 percent during the past there decades. Greater concentration of the Christian denominations are found in East Nusa Tenggara Province (87.67 percent of the province's total population), Papua (75.51 percent), and in North Sulawesi Province (69.27 percent).

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HISTORY Ancient Time

Indonesia in ancient time

DURING the Paleocene period (70 million years BC), Indonesia did not exist yet. Nor did it exist during the Eurocene period (30 million BC), the Oligacene period (25 million BC), and Miocene period (12 million BC). It is believed that Indonesia must have existed and was linked with the present Asian mainland, during the Pleitocene period (4 million BC). This period was also closely related to the first appearance of the Homonids. It was in this period that the "Java Man" must have inhabited that part of the world now called Indonesia. "The Java Man, named Pithecanthropus erectus by Eugene Dubois, who found fossilized remains on the island of Java, must have been the first inhabitant of Indonesia.

It was during the smelting of ice sheets north of Europe and America that resulted in the emergence of islands, due to the rise of the sea that the Indonesian archipelago emerged. It was also in this period (3000-500 BC) that Indonesia was inhabited by Sub-Mongoloid migrants from Asia who later inter-married with the indigenous population of the archipelago. A later mixture was brought about by Indo-Aryan migrants from the South Asian sub-continent of India (1000 BC).

The first Indian immigrants mostly from Gujarat in Southeast India came during the period of the first Christian era.

The Caka period in Indonesia was marked by the introduction of the Sanskrit language and the Pallawa script by the Indian Prince Aji Caka (78 AD). Beside this Pallawa script, the Devanagari script of the Sanskrit language was also in use as indicated in the ancient stone and copper inscriptions (pracasthies) unearthed in Indonesia. Both the language and scripts were in a later period of Indonesianized and called the "Kawi" language which has in its lexicon a number of additional Javanese words and phrases. Early trade relations were established between South India and Indonesia. Sumatra was then named "Swarna Dwipa" or the Island of Gold, the island of Java was called "Java Dwipa" or the Rice Island, while the Hindu Kingdom on Borneo (Kalimantan) Island was called Kutai. Relations with India were not only confined to religious and cultural exchanges which later on developed into diplomatic realizations between the Buddhist Kingdom of Sriwijaya and Nalanda in South India, but grew into well-developed trade relations.

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A continuous influx of Indian settlers went on during the 1st to the 7th century AD. The Hindu religion was peacefully spread throughout the archipelago gradually to all layers of society in Java and to the upper classes only in the outer islands.

The Period of Hindu Kingdoms

Many well-organized kingdoms with high civilization were ruled by indigenous Rajas who embraced the Hindu religion or Buddhist religion at a later stage, and it was for this reason that this period in history was called the Period of Hindu Kingdoms, which lasted from ancient time to the 15th century AD. Its culture and civilization, emanating from the Hindu and Buddhist religion were later syncretized with Indonesia's cultural elements and therefore also termed as the "Hindu-Indonesian" period.

Indian customs and culture were introduced with regard to the monarchic system of governing, their ancestral geneological pedigree system, the organizing of their armed forces, literature, music and dances, architecture, methods and ritual of worship and even the "Varna" (cast) division of labor system was introduced in a less strict division of the "Varnas." The Hindu religious interpretation of the "Vedas" Holy Scriptures in the Mahabharata and Ramayana epics presented through the Wayang puppets shadow-play as its visual media, was introduced and spread all over the country, which are still popular nowadays in the Republic of Indonesia.

The first Indian Buddhist arrived in Indonesia between 100 and 200 AD, introducing the Hinayana and the Mahayana sects. The latter became more advanced in the 8th century AD.

As Buddhism was also spread to China so many Chinese pilgrims went to India, sailing through the Strait of Malacca. Some of them on their way to India did make visits to Indonesia and even stayed for a while to get trained in and to develop their knowledge on the Buddhist religion. In 144 AD, a Chinese Buddhist Saint Fa Hsien, driven by a storm, landed in Java Dwipa (present Java Island) and stayed there for five months. The northern part of Java was then ruled by a Hindi Raja, Kudungga. Opposite his kingdom, on the island of Borneo, in Kutai region there were the successive rules of the Hindu Rajas, Devawarman, Aswawarman, and Mulawarman.

The Greek explorer and geographer, Ptolemy from Alexandria who visited Indonesia, named either the island of Java, or Sumatra, "Labadiou's Ptolemy's Chronicles described Java as a country having a good state system, advanced in agriculture, navigation and astronomy and mentioned that the people already knew the "batik" processing of cloths, while there already existed metal works, the use of the metric system and the production of coins.

Other Chinese chronicles dated 132 AD mentioned the existence of diplomatic relations between Java Dwipa and China.

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Around 502 AD, China, which already knew the use of ink and paper since 2nd century AD, recorded in their annals the existence of the Buddhist kingdom in Sumatra, "Kanto-Li", presumably in the neighborhood of present Palembang in South Sumatra, which was ruled by a Buddhist Raja Gautama Subhadra and later by his son Pryawarman or Vinyawarman who established diplomatic relations with China. Due to phonetically language barriers, "Kanto-Li" was presumably "Crivijaya," one of the might Buddhist kingdoms in Indonesia. The Chinese Buddhist pilgrim I-Tsing, on his way to India, visited Sriwijaya in 671 AD to study the Sanskrit language and returned 18 years later in 689 AD. Sriwijaya was then the center of Buddhist learning and had many well-known scholars in the Buddhist philosophy, like Sakyaktri, Dharmapala and Vajrabudhi. This kingdom had established diplomatic relations with the South Indian kingdom in Nalanda. The Crivijaya diplomatic mission had attached to its building a school when local Indians could learn the art of molding bronze statues, apart from developing their knowledge on the Buddhist philosophies. As Buddhism at the period flourished, so Sriwijaya influence sphere also grew in many other parts of the archipelago.

Another known Buddhist kingdom emerged on the island of Java (i.e. Central Java), called Cailendra and was ruled by the Cailendra dynasty or Rajas. It was in this period (750-850 AD) that the famous Buddhist monument "Borobudur" was built. In 772 AD, other Buddhist temples were built by Raja Panchapana such as the temple complexes of Mendut, Kalasan and Pawon. The Kingdom of Cailendra was also known as being the center of commercial and naval power, which was fostering art and culture. These temples are at present still found in the vicinity of Yogyakarta, the capital of the Special Territory of Yogyakarta.

A manual for singing, named the Chandra-Cha-ana was first composed in 778 AD.

One of the Pallawa language stone inscriptions (Pracasthi) of 732 AD mentioned the name of the Hindu Raja Sanjaya who was later identified as the Raja of the Hindu Kingdom of Mataram (Replacing Cailendra in Central Java).

The Hindu Civaite temple complex of Prambanan was built in 856 AD and accomplished in 900 AD by Raja Daksa. The capital of this Hindu Kingdom of Mataram was Medang Kamolan, in the neighborhood of present Semarang city. Earlier, in the year 675 AD, Hindu Civaite temples were erected on the mountain plain of Dieng, southwest of the capital of Medang Kamolan.

West of the Central Java Kingdom of Cailendra, in present West Java Province, were the Hindu Kingdoms of Galuh, Kanoman, Kuningan, and Pajajaran. "Pajajaran" was founded by Raja Purana, with Pakuan as its capital and which succeeded an earlier established kingdom of "Galuh." Later there were the kingdoms of Taruma Negara, Kawali and ParahyanganSunda.

At the end of the 13th Century, the Crivijaya Empire began to decline as a result of severance by its vassal states as well as due to frequent attacks by the South Indian Kingdom of Chola and by the Kingdom of Majapahit. It was ultimately entirely subdued

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by Majapahit who in its subjugation efforts was supported by Raja Adityawarman of the Kingdom of Melayu. Majapahit first conquered the Jambi Kingdom in Sumatra, which later extended its expansion along the rivers and finally annexed the Kingdom of Pagar Ruyung in West Sumatra, which completed the entire subjugation of Sumatra under the rule of Majapahit.

Meanwhile, for unknown reasons, mighty Hindu kingdoms of Central Java disappeared from its historic records and new prosperous Hindu kingdom emerged in East Java. Raja Balitung who ruled within 820-832 AD had once succeeded in uniting Central and East Java kingdoms. The disappearance of records was presumably caused by a catastrophic natural disaster, or by an endemic.

At the end of the 10th Century (911-1007 AD), a mighty Hindu Kingdom of Singasari was emerging in East Java. Its King, Raja Dharmawangsa codified laws and translated the Indian Sanskrit Hindu Epic of the Mahabharata into the Javanese language and also the philosophical essence of it as contained in the "Bhisma Parva" scripture. Besides, he also ordered the translation of the Hindu Holy Book, the "Bhagavat Gita."

Raja Airlangga who meanwhile also ruled over the island of Bali was known for his water-works along the Brantas River now still in use and who was a wise and firm ruler. Before his death in 1409 AD, Raja Airlangga divided the kingdom into the Kingdom of Jenggala and Daha or Kediri to be ruled by his two sons. Airlangga was also known as the promoter of the production of literary works. The "Panji" novel produced

Prambanan temple in Yogyakarta, built in 856 AD by Hindu King Sanjaya

frequent attacks by the South Indian Kingdom of Chola and by the Kingdom of Majapahit. It was ultimately entirely subdued by Majapahit who in its subjugation efforts was supported by Raja Adityawarman of the Kingdom of Melayu. Majapahit first conquered the Jambi Kingdom in Sumatra, which later extended its expansion along the rivers and finally annexed the Kingdom of Pagar Ruyung in West Sumatra, which completed the entire subjugation of Sumatra under the rule of Majapahit.

Meanwhile, for unknown reasons, mighty Hindu kingdoms of Central Java disappeared from its historic records and new prosperous Hindu kingdom emerged in East Java. Raja Balitung who ruled within 820-832 AD had once succeeded in uniting Central and East

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Java kingdoms. The disappearance of records was presumably caused by a catastrophic natural disaster, or by an endemic.

At the end of the 10th Century (911-1007 AD), a mighty Hindu Kingdom of Singasari was emerging in East Java. Its King, Raja Dharmawangsa codified laws and translated the Indian Sanskrit Hindu Epic of the Mahabharata into the Javanese language and also the philosophical essence of it as contained in the "Bhisma Parva" scripture. Besides, he also ordered the translation of the Hindu Holy Book, the "Bhagavat Gita."

Raja Airlangga who meanwhile also ruled over the island of Bali was known for his water-works along the Brantas River now still in use and who was a wise and firm ruler. Before his death in 1409 AD, Raja Airlangga divided the kingdom into the Kingdom of Jenggala and Daha or Kediri to be ruled by his two sons. Airlangga was also known as the promoter of the production of literary works. The "Panji" novel produced during this period are today still known and taught at certain university literary coleges in Thailand, Cambodia, and Malaysia.

Raja Jayabaya of the Hindu Kingdom of Kediri (1135-1157) wrote a book in which he foretold the downfall of Indonesia and made subservient to the white race domination (the Dutch), which afterwards was succeeded by a yellow race (the Japanese) domination and ended his book by forecasting that Indonesia ultimately will regain her independence under the rule of justice. During this golden period many other literary works were produced such as the Javanese version of the Hindu epic "Mahabharata" composed by the Hindu Mpu (Saint) Sedah and his brother Mpu Panuluh and published in 1157.

In 1292, the first European, Marco Polo visited Java and North Sumatra. These kingdoms of East Java were later succeeded by a might Hindu Kingdom of "Majapahit," first ruled by the Hindu Prince Wijaya or later known as Raja Kartarajasa.

The Moghul emperor, Kubilai Khan in 1293 attempted to invade Majapahit. His troops however were defeated and driven back to their ships. This gradually powerful growing empire also subdued the kingdom of Sriwijaya in South Sumatra, which was earlier attacked by the South Indian Kingdom of Chola.

The Mogul Empire founded in East Java became the most powerful. Hindu kingdom ever known in Indonesia under the reign of Raja Hayam Wuruk, which had dependencies in territories outside the present borders of the Indonesian archipelago as far as Champa in North Vietnam, Cambodia, and the present Philippines (1331-1364). Raja Hayam Wuruk who appointed his successful premier, Gajah Mada, succedeed in gradually uniting the whole Indonesian archipelago under the name "Dwipantara." During that golden period many literary works were produced such as "Nagara Kertagama" by the famous author, Prapancha (1335-1380) in which some parts described the diplomatic and economic ties with the then existing South-East Asian countries like Burma, Thailand, Tonkin, Annam,

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Gate of the mighty Majapahit Kingdom in Trowulan, East Java Cambodia and even with India and China. Other literary works written in the "Kawi" (old Javanese) like the Pararaton, Arjuna Wiwaha, Ramayana, Sarasa Muschaya and many other such literary works were later translated into many modern languages of Europe for study purposes. Also books on various codes of law were produced such as the "Kutaramanawa," the "Manava Dharma Sastra," the "Gajah Mada" and the "Adigama" Codes of Law.

The Period of Islamic Kingdoms

Gujarati and Persian merchants who embraced the Islam religion started to visit Indonesia in the 13th century and established trade links with Persia and India. Along with the trade, they also propagated the Islam religion among the Indonesian Hindus, particularly in the coastal area of Java, such as in Demak. At a later stage they succeeded in influencing and even converting Hindu ruling Rajas to Islam.

Grave of Maulana Malik Ibrahim, Gresik, East Java

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The Hindu Raja of the Kingdom of Demak was the first in Java who converted to Islam. It was this Islam Sultan who later further spread Islam west of Demak in Cirebon up till Banten and then eastwards along the northern coast of Java to the Kingdom of Gresik and ultimately caused the downfall of the mighty Hindu Kingdom of Majapahit (1513-1520). After the subjugation of Majapahit by Islam rulers, Islam spread further east of the island of Java and established the Bone and Goa Sultanates in Sulawesi, and further east to the northern part of the Maluku where the Sultanates of Ternate and Tidore were established. North of Java, Islam spread to Banjarmasin in Borneo and further west on the island of Sumatra and converted Palembang, Minangkabau (West Sumatra), Pasai and Perlak to Islam. Meanwhile, Majapahit aristocratic descendants, religious scholars and Hindu Khsatryas ret through the East Java Peninsula of Blambangan, further eastwards to the island of Bali and Lombok. However, in later periods the eastern part of the island of Lombok was converted to Islam which infiltrated the island from Makassar in South Sulawesi.

The capital of the Hindu Kingdom of Pajajaran in West Java was Sunda Kelapa (1300 AD), which was situated at the present Capital of the Republic of Indonesia, Jakarta. This capital of the Sunda Kelapa Kingdom was conquered by an Islam General Falatehan of the Sultanate of Demak in 1527, and ever since renamed it Jaya-Karta meaning "the City of Victory." Besides conquering Sunda Kelapa, General Falatehan succeeded also in defeating the Portuguese who attempted to conquer mentioned city.

European Influences

The Portuguese in Indonesia

The Portuguese, in search of Indonesian spices, entered Indonesia after conquering the Islam Kingdom of Malacca on the Malay Peninsula, which was followed by the Spaniards. Both started their first attempt to propagate Christianity in Indonesia. Their position was strongly felt then in Maluku.

The Beginning of Dutch Colonialism

In the meantime, the Dutch started their ventures to seek spices in Indonesia, which they sold in European markets with big profits. To make their trade more efficient and organized, the Dutch established the Dutch East India Company (VOC) with the aim to exploit the Spice Islands in the Indonesian archipelago for European markets (1602). As VOC's merchant fleets were often not free from pirate attacks, therefore, their sailing to the East were later on accompanied by Dutch warships in convoy. After Dutch VOC was nationalized by the then Dutch Government (1799), the exploitation of Indonesian commodities for Europe developed into Dutch suzerainty over Indonesian territories where the people on such territories were levied by force to make agricultural tributes to

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the Dutch. In 1605, Dutch colonialism began to have a foothold in Indonesia. The capital of Sunda Kelapa was named "Batavia" by the Dutch.

Meanwhile, the former Hindu Kingdom of Mataram in Central Java became the Islam Kingdom of Mataram and was ruled by the Islam Sultan Agung Hanyokrokusumo. Sultan Agung did not only develop the political power of the state but was also a great patron of arts and culture. He introduced the Islamic Javanese calendar in 1633. Sultan Agung was also the greatest enemy of the Dutch, who in 1629 sent his troops to Batavia to attack the Dutch bulwark but were repulsed by the troops of the then Dutch Governor General, Jan Pieters Zoon Coen. After Dutch seizure of Ambon in Maluku in 1605 and Banda Island in 1623, the Dutch gained all the spice islands trade monopoly. Merciless, Dutch policy of exploitation through "divide and rule" tactics were introduced. Indonesia's inter insular trade, such as between Makassar, Aceh, Mataram and Banten, as well as foreign trade was gradually crippled by the Dutch ruthless policies and which had forced Indonesia to merely become an agricultural country growing crops suitable to be sold to European markets.

The Dutch meanwhile pursued a so-called open door policy for Chinese to become their middlemen in their trade with Indonesia

Wars against the Dutch Sultan Hasanuddin of Goa waged a war against the Dutch in 1666, but was defeated by the Dutch who made Goa a vassal state of the VOC under the Treaty of Bunggaya signed in 1667. Prince Trunojoyo of the Kingdom of Madura, who waged a war against the Dutch was defeated and killed by the Dutch in 1680. To control spice monopolies in the Maluku, the Dutch carried out their notorious "Hongi Expedition" by burning clove trees of Indonesians which they regard as being "superfluous" causing the drop of its prices in European markets. These outrageous expeditions aimed at destroying crops were seldom not accompanied with cruelties, particularly conducted against those who opposed the destruction.

Grave of Dutch Major General J.H.R. Kohler who was killed during the Aceh War

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In 1740, the Dutch suppressed a rebellion in Jakarta sparked by dissatisfied Chinese. These rebellious Chinese were later joined by Indonesians. Ten thousand Chinese were massacred by the Dutch.

The Kingdom of Mataram, which deteriorated in strength, was divided by the VOC into the Principalities of Yogyakarta and Surakarta. Mismanagement and corruption forced the VOC into bankcruptcy and on December 31, 1799 all its territories in Indonesia were taken over by the Dutch Batavian Republic.

British Temporary Rule

In 1714, the British came to Indonesia and built their "Fort York" fortress in Bengkulu on the west coast of Sumatra, which was later renamed "Fort Marlborough." The British stayed in Bengkulu till 1825.

During the Napoleonic wars in Europe, when Holland was occupied by France, Indonesia fell under the rule of the British East India Company (1811-1816). Sir Thomas Stamford Raffles became Lieutenant-Governor-General of Java and dependencies subordinated to the Governor General in Bengal in India. Raffles introduced partial self-government and the slave trade was prohibited. In those days, slaves were held and traded by foreigners. Raffles introduced the "land-rent system" replacing the Dutch hated system of "contingent land use" and "compulsory deliveries of crops." The Buddhist monument of Borobudur and other Hindu temples were restored and research carried out. Raffles wrote his famous books entitled "The History of Java" in which he described Java's high civilization and culture.

Since the British stayed in Sumatra from 1814 till 1825, William Marsden wrote a similar book on the history of Sumatra, which was published in 1889. After the end of French occupation of Holland, the British and Dutch signed a convention in London on August 13, 1814, in which it was agreed that Dutch colonial possessions existing since 1803 should be returned and consequently the Batavian Republic reclaimed the Indonesian archipelago from the British in 1815, after the downfall of Napoleon.

Dutch Return to Indonesia

Soon afterwards, the Dutch intensified their colonial rule in Indonesia but was responded by wide-spread Indonesian revolts to regain their independence but were suppressed by the Dutch one after the other. To mention some of those revolts: Thomas Matulessy alias Pattimura staged a revolt against the Dutch in Maluku (1816-1818). Prince Diponegoro of Mataram led the Java war against the Dutch from 1825 till 1830, which was a fierce struggle for independence. Tuanku Imam Bonjol led the "Padri" war against the Dutch in West Sumatra. Teuku Umar led the Aceh war in North Sumatra (1873-1903). Sisingamangaraja, King of the Batak led the war against the Dutch in 1907.

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In 1908 the Dutch attempted to occupy Bali but were fiercely repelled by Raja Udayana who led the Bali war against the Dutch. Revolts were also launched in Goa in South Sulawesi and also in South Kalimantan.

Second Youth Congress held on 27-28 October 1928, in Jakarta

National Movements

When all these regional wars of independence were unsuccessful, Indonesian leaders started a more organized struggle against Dutch colonialism known as Indonesia's national movements for independence.

This period was pioneered by the founding of the "Boedi Oetomo" (Noble Conduct) movement on the 20th of May 1908, which was initially designed as a cultural association for Indonesian intellectuals, turned into politics, stimulated by Japan's victory over Russia in 1901, which accelerated modern national movements throughout Indonesia. The founder of "Boedi Oetomo" was Dr. Wahidin Sudirohusodo, supported by Dr. Soetomo, Gunawan and Suradji.

In 1911, the Society of Moslem Entrepreneurs "Sarekat Dagang Islam" was founded by Haji Samanhudi and others which was aimed at encouraging and sponsoring the interest of Indonesian business within the Dutch East Indies. However, in 1912 this middle class entrepreneurial organization turned into a political party and called them "Sarekat Islam" led by HOS Tjokroaminoto, Haji Agus Salim and others.

In 1911, a Progressive Moslem Organization "Muhammadiyah" was established by Hajji Dahlan in Yogyakarta aimed at social and economy reforms.

In December 1912, an Indonesian Party "Partai Indonesia" was founded by Dr. Douwes Dekker, later named Setyabudhi, with Dr. Tjipto Mangunkusumo and Ki Hajar Dewantoro (Suwardi Suryaningrat) striving for complete independence for Indonesia from the Dutch. These three leaders of the party were later exiled by the Dutch colonial government of the Dutch East Indies in 1913. In 1914, Communism was introduced in the Dutch East Indies by Dutch nationals, Sneevliet, Baars, and Brandsteder.

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In May 1920, Sarekat Islam was split into a right and left wing faction, the latter of which formed the Indonesian Communist Party "Partai Komunis Indonesia" (PKI) under the leadership of Semaun, Darsono, Alimin, Muso and others.

The Powerless People's Council "Volksraad"

In 1916, the Sarekat Islam Party held its first congress in Bandung and advocated in its resolution self-government for Indonesia in cooperation with the Dutch. When the Sarekat Islam demanded the Dutch Colonial Government of Dutch East Indies for minimum social legislation in the colony, this demand was countered by the Dutch by setting up powerless People's Council named the "Volksraad" in 1918 which was purely of an advisory nature to Dutch colonial rulers. The Indonesian representation within the council was by indirect election through regional councils, whereas part of the number of its members consisted of appointed colonial officials. It later developed into a semi-legislative assembly in which body some Indonesian prominent nationalist leaders, such as Dr. Tjipto Mangunkusumo, HOS Tjokroaminoto, Abdul Muis, Dr. GSSJ Ratulangi, MH Thamrin, Wiwoho, Sutardjo Kartohadikoesoemo, Dr. Radjiman, Soekardjo, and others, were members of mentioned body.

Under pressure of social unrest in the Netherlands at the end of World War I in Europe, the Dutch pledged to the Indonesians to grant self government to Indonesia known as the "November" pledge which was never realized.

Besides the "Volksraad" there was another body called the "Raad van Indie" whose members were appointed by the Ducth. Achmad Jayadiningrat and Sujono were among the very few Indonesian members of the "Raad van Indie."

Restrictions of Civil Liberties

Worsening economic conditions and increasing labor strikes in the Dutch East Indies prompted the Dutch colonial government in 1923 to put severe restrictions on Indonesian civil liberties and made further amendment to the colonial constitutional law and penal codes. Restrictions were put on the freedoms of assembly, speech and expression in writing.

Further Growth of Indonesian Organizations

Despite those restrictions by the Dutch colonial government, in 1922, an organization aimed at promoting Indonesian national education calling themselves "Taman Siswa" was founded on the 3rd of July of mentioned year by Ki Hadjar Dewantoro.

In 1942, the Indonesian Students Association "Perhimpunan Mahasiswa Indonesia" was founded by Dr. Mohammad Hatta, Dr. Sukiman, and others. This student's association had put more leverage to the Indonesian Nationalist Independence Movements in Indonesia in general.

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In 1926 till 1927, Communist revolts, led by the Indonesian Communist Party "PKI" broke against Dutch colonial rule. In November 1926 it rebelled in West Java and in January 1927 in West Sumatra. After Dutch suppression of these communist rebellions many Indonesian non-communist nationalist leaders were exiled to Tanah Merah, which the Dutch called "Boven Digul" in Papua. Dr. Tjipto Mangunkusumo was exiled to Bandaneira.

In February 1927, a federation of all Indonesian parties was called into being by Dr. Mohammad Hatta, called the "Perhimpunan Politik Kebangsaan Indonesia" (PPKI). Dr. Mohammad Hatta and Achmad Soebardjo and some other members of the federation attended the First International Congress of League Against Imperialism and Colonial Oppression in Brussels together with Jawaharlal Nehru and many other prominent nationalist leaders from Asia and Africa.

In July 1927, Ir. Soekarno, Sartono and others formed the Indonesian Nationalist Party (PNI), which adopted the Bahasa Indonesia as the official language. It exerted a militant policy of non-cooperation with the Dutch colonial authorities on the basis of a permanent conflict of interest between Indonesian nationalism and Dutch colonialism.

In the same year an all Indonesia's Nationalist Movement was set up among the Indonesian youth and women replacing earlier established youth organizations based on regionalism, such as the "Young Java," "Young Sumatra," and Young Ambon," etc.

On the 28th of October 1928, during the Second Indonesian Young Congress held in Jakarta, a pledge was made by the Indonesian Youth to strive for "One Nation," "One Motherland," and "One Language." This youth pledge is today still commemorated every year. "The Indonesia Raya" song, which later became Indonesia's National Anthem, was for the first time introduced at the Second Indonesian Youth Congress by its composer, Wage Rudolf Supratman.

Meanwhile, the Technical University College was set up in Bandung in 1920. The Law University College was opened in Jakarta, replacing the former Law School in 1924. The Medical University College, replacing the former Medical School was opened in August, 1927. All of these University Colleges were later united into the University of Indonesia in 1946 during Indonesia's independence.

In 1929, Dutch colonial authorities in the Dutch East Indies concerned about the developing national conscience and the increasing urge for independence by the Indonesian arrested PNI leader, Ir. Soekarno in December of mentioned year which caused great discontent among the Indonesians.

Meanwhile in 1930, the world suffered from an economic and monetary crisis, which had a great impact in the Indies being a raw material producing colony of the Dutch. A balanced budget policy for the colony was strictly carried out detrimental to the economic and educational life of the Indonesians. Other leaders of the PNI, Gatot Mangkupradja and Maskun Supriadinata were tried in court on charges of "plotting" against the colonial

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regime. Ir. Soekarno was released in September 1931 but again exiled in August 1933 and remained in Dutch custody till the Japanese invasion in 1942.

In January 1931, Dr. Soetomo aimed at elevating the status of the Indonesian people on the basis of nationalism founded the Indonesian Unity Party, the "Persatuan Bangsa Indonesia." In April of the same year, the PNI was abandoned and followed by the founding of another party, the Indonesia Party or "Partai Indonesia" by Sartono, LLM, based on nationalism and Indonesia's self-supporting movement. In the same year, Sutan Syahrir founded the Indonesian National Education Group or "Pendidikan Nasional Indonesia," abbreviated as the new PNI, which was joined by Dr. Mohammad Hatta.

In 1933, a mutiny broke out on the Dutch warship "Zeven Provincien," the Indonesian nationalists were held responsible for this. In 1934, Sutan Syahrir, Dr. Mohammad Hatta and other nationalist leaders were arrested by Dutch colonial authorities and sent into exile till 1942.

In 1935, under the leadership of Dr. Soetomo a merger of the "Persatuan Bangsa Indonesia" organization with the "Boedi Oetomo" was brought about, aimed at striving for the independence of Greater Indonesia, the "Parindra."

Indonesian Petition

In July 1936, Sutardjo submitted to the "Volksraad" the Indonesian petition calling for greater autonomy for Indonesia. This petition was flatly rejected by the Dutch dominated "Volksraad."

In 1937, Dr. AK Gani founded the Indonesian People's Movement, "Gerakan Rakyat Indonesia," which was based on the principles of Indonesian nationalism, social independence and Indonesia's self-supporting efforts.

In 1939, the All Indonesia Political Federation "GAPI" called for the establishment of Indonesia's full-fledged parliament, which was flatly rejected by the Dutch government in Holland in 1940. They also demanded an Indonesian National Military Service in order to defend Indonesia in times of war. This demand was also rejected in spite of the grave international situation, which proceeded the outbreak of the Second World War, the situation of which called for fundamental and progressive reforms in colonies and dependencies in Asia in general.

Japanese Occupation

After the Japanese attacks of Pearl Harbor in Hawaii, Japanese Armed Forces went southwards and occupied several Southeast Asian countries. After the British defeated Singapore, Japanese forces invaded the Dutch East Indies whereupon the Dutch colonial army surrendered to the Japanese in March 1942. Ir. Soekarno was released from his

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detention. The Japanese introduced Japan's "Great East Asia Co-Prosperity Idea," which became unpopular in Indonesia as the Indonesians realized that Japanese occupation was just an alternate colonialism substituting Dutch colonialism. For the sake of furthering the course of Indonesia's independence however Ir. Soekarno and Dr. Mohammad Hatta were giving limited assistance to Japanese occupation authorities on the surface while other Indonesian nationalist leaders went underground to stage insurrection all over Java, such as in Blitar (East Java), Tasikmalaya and Indramayu (West Java), Sumatra and Kalimantan.

Due to the hardships suffered by the Japanese in waging the Pacific war caused by interruptions of their supply lines and by Indonesian insurrections, the Japanese occupation forces in Indonesia ultimately gave in to recognize the Indonesian Red and White colored flag as the Indonesian national flag which was followed later by the recognition of the "Indonesia Raya" as Indonesia's National Anthem, and the "Bahasa Indonesia" as Indonesia's National Language.

After persistent demands by the Indonesians for complete Indonesianization of the Civil Administration in Indonesia, the demands were ultimately met the Japanese. This became Indonesia's basis to further build up the foundation for the proclamation of independence of the Republic of Indonesia.

Proclamation of independence …..sian insurrections, the Japanese occupation forces in Indonesia ultimately gave in to recognize the Indonesian Red and White colored flag as the Indonesian national flag which was followed later by the recognition of the "Indonesia Raya" as Indonesia's National Anthem, and the "Bahasa Indonesia" as Indonesia's National Language.

Text of Proclamation

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After persistent demands by the Indonesians for complete Indonesianization of the Civil Administration in Indonesia, the demands were ultimately met the Japanese. This became Indonesia's basis to further build up the foundation for the proclamation of independence of the Republic of Indonesia.

Proclamation of independence

The final defeat of Japan after the dropping of the atomic bomb in Hiroshima and Nagasaki on the 6th and 9th of August 1945 prompted the Japanese to surrender unconditionally to the Allies. This constituted an ample opportunity for Ir. Soekarno and Dr. Mohammad Hatta to proclaim Indonesia's independence on the 17th of August 1945. The Republic of Indonesia came into being based on Pancasila under a constitution, with strong Presidential powers, a Parliament, Supreme Advisory Council, State Audit Board and a People's Consultative Assembly as the embodiment of people's sovereignty in free Indonesia, all of which were adopted on the 18th of August 1945. This 1945 Constitution is still in force up till now. The Red and White flag was officially accepted as the National Flag of Indonesian and the Bahasa Indonesia as the National Language. Ir. Soekarno was elected as the first Indonesian President and Dr. Mohammad Hatta as Vice-President. On the 5th of September 1945, a Presidential Cabinet was formed with President Soekarno as Premier.

Wars of Independence against the Dutch

Soon after the independence proclamation, British troops as a component of the Allied Forces landed in Indonesia with the task of disarming Japanese Forces in Indonesia. Dutch troops have meanwhile used this opportunity to also land in Indonesia however with a different purpose, i.e. to restore the Dutch East Indies. The Dutch were in the beginning aided by the British Forces under General Christson which was confirmed later by Lord Louis Mountbatten, British Commander of the Allied Forces in Southeast Asia and based in Burma, whereas the British Allied Forces' task was to be the repatriation of Allied Prisoners of War and Internees and the disarming and internment of Japanese troops in Indonesia.

Fierce fighting broke out in Surabaya on the 10th of November 1945 between the British troops and Indonesian armed volunteers, which culminated in "Allied Forces" attacks by battle ships, airplanes tanks and armored cars in which Brigadier Mallaby died. The newly recruited republican army was not yeat ready to face such an all-out attack by such superior and well-armed Allied Forces fresh from their victorious battle against Hitler's Nazi forces in Europe. The Indonesian Armed Forces therefore withdrew from urban battles and organized themselves into guerilla forces, which put heavy pressures on the invading troops. The newly Republican Armed Forces fought along with the people armed units. Meanwhile, Dutch troops, under the pretext of representing Allied Forces, grew in number and attacked Indonesian Republican strongholds twice in their military actions between 1945-1949.

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During the 1948 Dutch military action against the Republic, the Indonesian Communist Party unilaterally proclaimed the "Indonesian People's Republic" in Madiun (East Java), armed themselves and began to attack republican forces, from the rear. Squeezed by Dutch forces and communist forces, the Indonesian people and the republican army fought their enemies back in two fronts.

Since its inception, Indonesia experienced threats from without and from within.

Diplomacy vis-à-vis Fighting

On the 11th of November 1945, Vice-President Hatta issued a Manifesto laying down the policy of peace with the whole world and the principle of good neighbor policy for the new Republic.

On the 14th of November 1945, the newly appointed Prime Minister, Sutan Sjahrir introduced a parliamentary system in the republic with political party representation.

On the 22nd of December 1945, Sutan Sjahrir announced Indonesia's acceptance of the British proposals to disarm and confine to internment camps, 25,000 Japanese troops within Indonesia's territory, which successfully carried out by the Indonesian National Army "TNI." On the 28th of April 1946, the transportation of the Japanese troops to be emigrated, took place from all places in Indonesia.

When fighting with Dutch troops continued, even in urban areas, including Jakarta, the seat of the Government was moved from Jakarta to Yogyakarta on 4th January 1946.

The Indonesian Question in the United Nations

Since the war in Indonesia dragged on which was considered as endangering the maintenance of international peace and security, in line with the principles of the United Nations as stipulated in Article 24 of its Charter, the question of Indonesia was officially brought before the Security Council by the Ukranian Soviet Socialist Republic. Soon afterwards the first official meeting of representatives of the Republic of Indonesia and the Netherlands took place on the 10th of February 1946, under the chairmanship of Sir Archibald Clark Kerr.

Besides Indonesian forces putting stiff resistance against Dutch military aggressions and therefore dragging the war, the Indonesian government also conducted diplomatic offensive against the Dutch.

With the good offices of Lord Killearn of Great Britain, Indonesia and Dutch representatives met and negotiated together at Linggarjati in West Java in which negotiations the Dutch were forced to recognize the "de facto" sovereignty of the Republic of Indonesia over the territories in Java, Sumatra and Madura. The Linggarjati

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Agreement was initiated on the 15th of November 1946 and officially signed on the 25th of March 1947.

This agreement was in fact in violation of Indonesia's independence, which was proclaimed on the 17th of August 1945. Therefore, guerilla fighting continued putting heavy pressure on Dutch troops wherever they exercised their military operations.

The first Dutch military aggression was launched in July 1947, in which Dutch troops intensified from their urban military bases, their military aggression against Indonesia guerilla strongholds. This first military aggression was ended by the signing of the "Renville Agreement" on the 17th of January 1948, under the auspices of the United Nation's Security Council, initiated by representatives of India and Australia.

It was in September 1948 that Muso, leader of the Indonesia's Communist Party (PKI) led the communist coup and attacked the Indonesian Army from the back, but was finally defeated and killed.

On the 19th of December 1948, the Dutch, ignoring the Renville Agreement launched their second military aggression against the Republic and succeeded to penetrate into the then Republican capital, Yogyakarta, which resulted in the capture of President Soekarno, Vice-President Dr. Mohammad Hatta and other Republican leaders whom they interned on the island of Bangka, off the east coast of Sumatra.

The Indonesian Government still functioned under caretaker Syafruddin Prawiranegara who headed the Republican Emergency Government with headquarters in Bukittinggi, West Sumatra.

On the 20th of January 1949, initiated by Jawaharlal Nehru of India, 19 nations gathered in New Delhi at the Asian meeting which adopted a resolution submitted to the United Nations demanding the Dutch to surrender complete sovereignty to the Republic of Indonesia by 1st January 1950. It also demanded the Dutch to surrender all Indonesian prisoners and territories seized during their military actions to the Indonesian Republic.

On the 28th of January 1949, the UN Security Council adopted a resolution on a ceasefire, the release of republican leaders and their return to Yogyakarta.

On the 7th of May 1949, an agreement was signed between Indonesia's Emissary, Mohammad Roem and Dutch Emissary Van Royen calling for the end of hostilities, the restoration of the Indonesian Republican Government to Yogyakarta and the holding of further negotiations, under the auspices of a UN Commission at a Round Table Conference between Indonesia and the Dutch.

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World Recognition of Indonesia's Sovereignty

Indonesian Representative Office in Colombo, Ceylon

On the 23rd of August 1949, the Round Table Conference was held in The Hague under the auspices of the United Nations. The conference was concluded on the 2nd of November 1949 in which an agreement was reached that Holland was to recognize the sovereignty of the Republic of Indonesia.

On the 27th of December 1949, the former territory of the Dutch East Indies ceased to exist and became the sovereign Federal Republic of Indonesia under a federal constitution based on a parliamentary system providing Cabinet responsibility of Parliament, while the sovereignty over Papua (former West New Guinea) was suspended till further negotiations between Indonesia and Holland. This issue had since become the source of perpetual conflict between the new Republic and Holland, which dragged on for more than 13 years. And since September 28, 1950, Indonesia became a member of the United Nations.

The Unitary State of the Republic of Indonesia

On the 15th of August 1950, the original proclaimed Unitary State of the Republic of Indonesia was restored however, retaining a liberal democratic system of a cabinet answerable to the House of the People's Representatives, which became the source of frequent changes of cabinet or governments. This situation naturally could not be a firm basis for national development in a developing country, which had just become an independent state, where no political stability could be secured.

With the reinstatement of the Unitary State, the President became Chief Executive and Mandatary of the People's Consultative Assembly. He is to be assisted by ministers of his choice and at his discretion and who can not be discharged by the House.

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The First Government of the Republic of Indonesia

The Dutch East Indies was since its unconditional surrender to the Japanese Armed Forces on the 7th of March 1942, occupied by Japanese occupation forces. The official surrender took place at 16.00 hours of that date in which the Dutch East Indies' Governor General, Mr. Tjarda van Starkenborgh Stachouwer and Dutch East Indies Armed Forces Commander, Ter Poorten signed the documents of surrender to the Japanese Commander, General Imamura. It was only after the 14th of August 1945, i.e. when Japan surrendered to the Allies after the atom bomb dropped at Hiroshima that a power vacuum existed in the Indonesian archipelago.

Earlier, Soekarno and Hatta had pressed the Japanese for yielding to

Indonesia's demand to set up a committee for the preparation of Indonesia's independence, consisting of 26 members comprising Indonesian nationalist leaders chaired by Ir. Soekarno. This forum provided ample opportunity for these Indonesian nationalist leaders to debate, weight and contemplate about the ideological basis, the structure of the state and the constitution to be, for a sovereign Indonesia. After hectic debates which went on and which were seldom not interrupted by extreme conflicting views, Soekarno emerged as the over-riding leading figure who won the acceptance of the "Pancasila" principles to be the ideological basis for a sovereign Indonesia. It was also at this forum that Indonesia's first constitution, the 1945 Constitution, was debated and ultimately adopted.

This power vacuum prompted Soekarno and Hatta to proclaim Indonesia's independence on the 17th of August 1945, followed by the election of Soekarno and Hatta as Indonesia's first President and Vice-President. On the same day, the Committee for the Preparation of Indonesia's independence dissolved itself.

The first year of the sovereign Republic of Indonesia under the Presidency of President Soekarno was marked by a war of defense against the Dutch who attempted to reinstate the former colony of the Dutch East Indies. The Indonesian Communist Party (PKI) disagreed with the principles of Pancasila and in 1948 staged an armed and bloody rebellion against the newly proclaimed Republic of Indonesia and unilaterally proclaimed a Communist "People's Republic" in the region of Madiun (East Java).

When the Dutch, due to Indonesia's armed resistance and pressed by world opinion as manifested in the UN resolution finally recognized Indonesia's independence, another armed rebellion flared up pressing for Islamic state under the leadership of Kartosuwirjo who coined his demand as "Darul Islam."

Since then many other armed rebellion emerged such as the "Queen of Justice" (APRA) rebellion led by an ex-Dutch Army Captain, Turco Westerling. Outside Java, other armed revolts were staged such as in Maluku where demobilized ex-colonial army-men faithful to the Dutch Crown proclaimed the Republic of South Maluku. In South Sulawesi ex colonial army-man, Andi Aziz also rebelled. In Kalimantan Ibnu Hadjar led another

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armed revolt, while in Sumatra and later linked up with North Sulawesi rebellions against the central Government demanded separation like the case in the South Maluku. At the end of this chain of armed rebellion emerged the second communist rebellion on 30rd of September 1965 led again by the Indonesian Communist Party manifested in an abortive coup attempt by kidnapping and murdering six top army generals of the Defense Department.

The first Republican Government under President Soekarno after the recognition of independence was marked by efforts to unite the Indonesian people and to claim the Dutch occupied Province of Papua. The political pattern which governed the new republic was a liberal parliamentary democracy based on a provisional constitution of the Federal Republic of Indonesia as imposed by the Dutch after its abandonment of the 17th of August 1950. Political strive was rampant due to the multi-political party system Indonesia copied from the then existing system in Holland. This system has not seldom led towards a dichotomy of extreme political and ideological view which found linkages between parliamentary and armed conflicts.

President Soekarno succeeded in carrying out Indonesia's first General Elections in 1955 in which 47 political parties contested to elect their representatives for the House of People's Representatives and for the Constituent Assembly, which was to lay down a new constitution for the Republic. This election was won by the Indonesian Nationalist Party (PNI), the Nahdlatul Ulama Moslem Scholars Party (NU), the Muslim Majelis Sjura Party (Masyumi) and the Indonesian Communist Party (PKI). Their elected representatives in the Constituent Assembly failed to reach a consensus on laying down a new constitution which compelled President Soekarno to dissolve the Constituent Assembly and the House which he was constitutionally entitled to and called for the reinstatement of the 1945 Constitution.

The Asian-African Conference

President Soekarno had to his credit the holding of the Asian-African Conference in Bandung, West Java, from April 18 to 24, 1955. The initiative was taken by Indonesia, India, Pakistan, Myanmar and Ceylon (Sri Lanka). The conference was attended by delegates from 24 Asian and African countries. The purpose of the meeting was to promote

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The Asian African Conference, April 1955,

in Bandung

closer and amiable cooperation in the economic, cultural and political fields. The resolution adopted became known as the "Dasa Sila", or "The Ten Principles," of Bandung. It strived for world peace, respect for one another's sovereignty and territorial integrity, and for non-interference in each other's internal affairs. The resolution also sought to uphold the human rights principles of the United Nations.

The Asian-African Conference became the embryo of the Non-Aligned Movement. The seeds that sprouted in Bandung took firm root six years later when 25 newly independent countries formally founded the Non-Aligned Movement at the Belgrade Summit of 1961. Since then the membership of the Movement has grown to its present strength of 112 member countries.

The Beginning of the New Order Government

Over-confident of their strength and precipitated by the serious illness of President Soekarno, who was undergoing treatment by a Chinese medical team from Beijing, the Indonesian Communist Party (PKI) attempted another coup on September 30, 1965. The uprising, however, was abrupt and quickly stamped out by the Armed Forces under Major General Soeharto, then Chief of the Army's Strategic Command.

On the night of September 30, or more precisely in the early hours of October 1, 1965, armed PKI men and members of Cakrabirawa,

the President's security guard, set out to kidnap, torture and kill six top Army Generals. Their bodies were dumped in an abandoned well at Lubang Buaya, on the outskirts of Jakarta. The coup was staged in the wake of troop deployments to Kalimantan, at the height of Indonesia's confrontation with Malaysia. Moreover, at the time, many cabinet members were attending a celebration of the Chinese October Revolution in Beijing. It was during this power vacuum that the communists struck again.

Under instructions from General Soeharto, crack troops of the Army's Commando Regiment (RPKAD) freed the central radio station (RRI) and the telecommunication center from communist occupation.

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Students made for the streets in militant demonstrations to fight for a three-point claim, or "Tritura," that aimed to ban the PKI, replace Soekarno's cabinet ministers, and reduce the prices of basic necessities. They set up a "street parliament" to gather the demands of the people.

Under these explosive conditions, President Soekarno eventually gave in and granted Soeharto full power to restore order and security in the country. The transfer of power was affected by a presidential order known as "the 11th of March order" of 1966. Soon afterwards, on March 12, 1966, General Soeharto banned the PKI. This decision was endorsed and sanctioned by virtue of the Provisional People's Consultative Assembly Decree Number XXV/MPRS/1966. He also formed a new cabinet, but Soekarno remained as Chief Executive. This brought dualism into the cabinet, particularly when Soekarno did not show support for the cabinet's program to establish political and economic stability. Hence, a special session of the Provisional People's Consultative Assembly (MPRS) was convened from March 7-12, 1967. The Assembly resolved to relieve Soekarno of his presidential duties and appointed Soeharto as Acting President, pending the election of a new President by an elected People's Consultative Assembly.

The New Order Government

Ever since taking office in 1967, the New Order Government of President Soeharto was determined to return constitutional life by upholding the 1945 Constitution in a strict and consistent manner and by respecting Pancasila as the state philosophy and ideology.

To emerge from the political and economic legacy of Soekarno's Old Order, the new government set out to undertake the following:

1. To complete the restoration of order and security and to establish political stability.

2. To carry out economic rehabilitation.

3. To prepare a plan for national development and execute it with the emphasis on economic development.

4. To end confrontation and normalize diplomatic relations with Malaysia.

5. To rejoin to the United Nations, which Indonesia had quit in January 1965.

6. To consistently pursue an independent and active foreign policy.

7. To resolve the West Irian question.

8. To regain Indonesia's economic credibility overseas.

9. To hold general elections once every five years.

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With regard to Malaysia, not only were relations normalized but Indonesia together with Malaysia, the Philippines, Singapore and Thailand joined to establish the Association of Southeast Asian Nations (ASEAN). Further, Brunei Darussalam became the sixth member of ASEAN, while Vietnam was accepted as the seventh member of this regional organization followed suit by Myanmar, Kampochea and Laos. The objective of the association is the establishment of regional cooperation in the economic, social and cultural fields, but ASEAN also operates in the political area.

To prepare for national development, in addition to economic rehabilitation, Indonesia secured an agreement with creditor countries to reschedule an overseas debt of US$5 billion. With the recovery of the country's overseas credibility, Indonesia succeeded in the formation of a consortium of creditor countries to assist in her economic development. This consortium was known as the Inter-Governmental Group on Indonesia (IGGI) and included the United States, Canada, Australia, New Zealand, Japan, Britain and a number of West-European countries. Its annual meetings were held in Amsterdam under the chairmanship of the Netherlands. Currently, the IGGI has been replaced by the Consultative Group for Indonesia (CGI) consisting of the former members of IGGI (except the Netherlands) and five new creditors.

The Reform Order Government

Since the outset of the First Five-Year Development Plan in 1969, Indonesia under the New Order Government of President Soeharto had endeavored to achieve its national development goals. Indonesia, indeed, had been able to achieve substantial progress in various fields which had been enjoyed by the majority of the Indonesian people. Indonesia had gained success in the national development. Unfortunately, severe economic crisis, which began with the monetary crisis, struck Indonesia as of July 1997.

Since the middle of 1997, the people's standard of living dropped considerably. The decline in the people's standard of living was aggravated by various political tensions arising from the 1997 general elections. The political system which had been developed since 1966 turned out to be unable to accommodate the dynamism of the aspirations and interests of the community. This led to riots and disturbances. To a certain extend, they reflected the malfunctioning of the political order and of the government, finally causing this situation to develop into a political crisis.

A number of student demonstrations ensued, including the occupation of the People's Consultative Assembly/House of People's Representatives compound. They appealed for political and economic reform; demanded President Soeharto to step down and stamp out corruption, collusion and nepotism. Critical moments prevailed in the capital, Jakarta, and other towns from 12 to 21 May 1998.

On May 12, a tragedy happened in the Trisakti University Campus, causing the death of four students. On May 18, the leadership of the House suggested the President resign. The President's effort to accommodate the developing aspirations of the people by forming are

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form cabinet and a reform committee never materialized as there was no adequate support from various circles.

Finally, on May 21, 1998, President Soeharto, after a 32-year rule of the New Order Government resigned. Pursuant to Article 8 of the 1945 Constitution and the People's Consultative Assembly decree No. VII/1973, he handed over the country's leadership to Vice-President Bacharuddin Jusuf Habibie. After the announcement, Habibie took his oath of office before Chief Justice Sarwata to become Indonesia's third President. Earlier President Soeharto disbanded the cabinet which he formed shortly after his reelection for a seventh five-year presidential term in March.

A day after his installment as the third president, Habibie formed the Reform Development Cabinet. He picked the ministers from the various political and social forces, including three politicians from the United Development Party (PPP) and the Indonesian Democratic Party (PDI), to provide the needed synergy.

President B.J. Habibie outlined the agenda for reform during his presidency as follows:

1. Rooting out corruption, collusion and nepotism, and create a clean government.

2. Reviewing the five political laws upon which the current political system is bound. They are the laws on mass organization, the House of Representatives (DPR), the People's Consultative Assembly (MPR), political parties, regional administrations and elections.

3. Implementing sweeping reform in all sectors, including in the political, economic, and legal fields, to enable the government to satisfy mounting demands for a strong and clean government.

4. Boosting output from the agriculture, agribusiness, export-oriented industry and tourism sectors.

5. Safeguarding the implementation of the 1998/99 state budget

6. Accelerating the bank restructuring program

7. Resolving the problem of corporate foreign debts.

8. Conducting a special session of the People's Consultative Assembly (MPR) in November 1998, followed by General Elections on May 1999.

General Elections

The Indonesian nation has been so far organizing general elections for nine times, namely in 1955, 1971, 1977, 1982, 1987, 1992, 1997, 1999 and the recent 2004. The first, widely acclaimed as a fairly democratic general elections, was held in 1955 under the

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Administration of Soekarno, the first president of the Republic. During this general elections many parties, with ideologies ranging from religious, Marxism and nationalistic, contested to elect members of the House of Representatives and the Constituent Assembly with the task to draw up the nation's new constitution to replace the existing 1945 Constitution adopted on August 18, 1945, the day after the nation proclaimed its independence. However, after deliberating for three years, they failed in scoring a majority. As a result, then President Soekarno was forced to dissolve the Assembly, and to issue a Presidential Decree calling for the reinstitution of the 1945 Constitution. The Presidential Decree, issued on July 5, 1959

revoked at the same time a Government Manifesto calling for the formation of as many political parties as possible.

The second was in 1971, held under the Administration of President Soeharto, in which there were still many parties contesting. Then in 1975, Act No.3 of 1975 was issued with regard to the fusion of about 150 political and mass organizations into two political parties i.e.

Eligible voters cast their votes at the 1955 General Election

Partai Persatuan Pembangunan (the United Development Party) and Partai Demokrasi Indonesia (the Indonesian Democratic Party), and one Functional Group (Golongan Karya). After that there had been only the two parties and the functional group contesting the next five general elections, in which the Functional Group always came up first with a landslide victory. Only during the 1999 General Elections under the relatively short-term Administration of President B.J. Habibie, many parties (48 parties) could contest again. This time Partai Demokrasi Indonesia-Perjuangan, the Indonesian Democratic Party of Struggle (PDI-P) won the contest by getting the most votes, relegating the Golkar Party to second place.

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Eligible voters cast their votes at the 2004 General Election

Counting of votes in the poll station in 2004 General Election

The 2004 General Elections

Article 1 clause (2) of the amended 1945 Constitution stipulates that "sovereignty is vested with the people and shall be exercised according to the Constitution." It explicitly means that sovereignty shall no more be exercised by the People's Consultative Assembly as it did previously, but shall be done according to the provisions of the Constitution. Under this stipulation all members of the House of Representatives and the Regional Representatives Council _the members of the two legislative bodies then constitute members of the Assembly_ and members of provincial and district as well as municipal Houses of Representatives should be elected, and for the first time in the history of this Republic, the President and Vice-President are to be elected direct by popular votes.

Translating the stipulation are Law No. 23 of 2003 concerning General Elections to elect the President and Vice-President, Law No. 31 of 2002 on Political Parties, Law No. 12 of 2003 on General Elections to elect Members of the House, Regional Representatives

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Council and Regional Houses of Representatives, and Law No. 22 of 2003 concerning the Composition and Status of the Assembly, the House, and the Regional Houses.

Law No. 12 of 2003 stipulates that the number of seats of the House is 550; that of Provincial Houses shall not be less than 35 and no more than 100 seats, and those of district/municipal Houses shall not be less than 20 and no more than 45 seats.

Contesting in the 2004 general elections to elect members of House, and regional Houses were 24 political parties to fight for seats mentioned earlier. Five major parties topping the outcome of the 2004 general elections are: the Golkar Party that garnered 24,480,757 votes to win 127 seats of the House, followed by the Indonesian Democratic

Party of Struggle (PDI-P) with 21,026,629 votes to get 109 seats, the Nation's Awakening Party (PKB) with 11,989,564 votes to gain 52 seats, the United Development Party (PPP) with 9,248,764 votes to have 58 seats and the Democratic Party with 8,455,225 votes to seize 57 seats. There were 148 million eligible registered voters, but only 124 million or some 83 percent cast their ballots.

Pursuant to Article 6A of the Constitution, the election of the President and Vice President is in pair by direct popular votes, and the candidates in pair shall be proposed by a political party or a coalition of parties participating in the general elections. During the 2004 general elections to elect the President and Vice President, there were five candidate pairs competing, namely: (1) H. Wiranto-Ir. H. Salahuddin Wahid, proposed by the Golkar Party; (2) incumbent President Megawati Soekarnoputri-K.H. Hasyim Muzadi, proposed by the Indonesian Democratic Party of Struggle; (3) Prof. DR. Amien Rais-Ir. Siswono Yudo Husodo, proposed by the National Mandate Party (PAN); (4) Susilo Bambang Yudoyono-Muhammad Jusuf Kalla, proposed by the Democratic Party; (5) and incumbent Vice Prersident Hamzah Haz-Agum Gumelar, proposed by the United Development Party (PPP). With no single pair winning a majority votes in the first-round presidential election on July 5, the two top pairs, Susilo Bambang Yudoyono-Jusuf Kalla and Megawati Soekarnoputri-Hasyim Muzadi were eligible to contest to the election run-off that was held successfully on September 20, 2004 in fair, peaceful and democratic manner.

The General Elections Commission (KPU), an independent institution that organized the legislative and presidential-vice-presidential elections, announced officially on October 4, 2004 that retired Army general Susilo Bambang Yudoyono and his running mate Mohammad Yusuf Kalla as the winner of the election runoff. The Susilo Bambang Yudoyono-Jusuf Kalla pair garnered 69,266,350 votes or 60.68 percent of total valid votes, against 44,990,704 votes or 39.38 percent seized by incumbent Megawati Soekarnoputri and Hasyim Muzadi. There were 155 million registered voters but only 114,257,054 votes or less than 80 percent declared valid.

Susilo Bambang Yudoyono is the first president of the Republic since Indonesia proclaimed its independence on August 17, 1945, who was elected by direct popular votes.

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Political Party

Law No. 31 of 2002 that governs political parties was enacted on December 27, 2002 to replace Law No. 2 of 1999.

The law stipulates the formation, maintenance, and development of political parties that basically constitute one of the reflections of citizens' rights to assemble, associate, and express opinion. Through those political parties, people can manifest their rights to express their opinion concerning their life direction and their future in the society and state. Political parties constitute the most important component in the democratic political system. Therefore the political structure must rely on the people's sovereign norms which give freedom, equality and togetherness.

In the democratic political system, freedom and equality are exercised in order to be able to reflect the feeling of togetherness that guarantees the manifestation of the people's whole ideals. It is realized that the process that lead to political life giving a role to political parties as a national asset takes place on the foundation of the principles of change and continuity that promote democratic maturity and responsibility. This can be achieved by systematizing the parties' life, in addition to the existence of appropriate system and process of general elections.

To create the aims of the society and state having national perspective, it is necessary to establish a sound and mature party life and system, i.e. a simple multiparty system. By the simple multiparty system it will easier to carry out cooperation for the creation of national synergy. This mechanism tends not only to discourage monolithic, but also better nurture democratic environment that enables political parties to take optimum role.

Political parties as participants of general elections have the opportunities to struggle to win the broad interests of the people, fill up state institutions, and to form government.

Through implementing their functions as agents of political education, socialization, interests formulation and channeling, and communication, political parties in fact will improve political awareness and participation of the society, and cohere various groups and social classes, underpin national unitary and integrity, materialize justice, uphold the law, respect human rights, and secure stability.

A political party must be established by a notary public certificate and registered to the Department of Justice, with the requirements of having regional party boards at least 50 (fifty) percent of the total provinces, some 50 percent of the total districts/municipalities in each province concerned, and 25 percent of the total sub-districts in each district/municipalities concerned.

A political party is prohibited to receive contribution either in the form of goods or money from individual and/or enterprise or any part whatsoever without stating clear identities, and over the fixed limit, and receive donation and/or grant contribution from foreign parties in any means that is against the statutory regulations.

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In addition, a political party is prohibited to ask or receive contribution from state-owned enterprises, regional-owned enterprises, national-owned enterprises, and other names, cooperatives, foundations, non-government organizations, social organizations, and humanity organizations.

With the taking effect of this law, the settlement of the cases of political parties in penal process adjusts itself to the provisions of this law.

General Elections to Elect Members of the Houses, and the Council

The amendments to the 1945 Constitution of the Republic of Indonesia, Article 1 clause (2) states that sovereignty shall be vested in the people and shall be exercised according to the Constitution. This amendment means that the sovereignty is no longer fully exercised by

the People's Consultative Assembly, but shall be exercised according to the provisions of the Constitution.

Based on these amendments, all members of the House of Representatives (DPR), the Regional Representatives Council (DPD), the Regional Houses of Representatives (DPRD) of the provinces, and the Regional Houses of Representatives of the Districts/Municipalities shall be elected through elections which shall be executed based on the principles of direct, general, free, secret, fair, and just and once in every five years. The general elections will in turn produce democratic representative institutions and government.

In conformity with the reformation mandate, the general elections shall be executed in a more qualified fashion in order to secure sound competition, higher representation, and clearer mechanism of accountability. To this end, a new law is required to replace Law No. 3 of 1999 on General Elections.

General elections shall be executed based on the principles of direct, general, free, secret, honest, and fair.

According to the Law, the membership of the House of Representatives (DPR) shall total 550 persons, while of the House of Representatives of the provincial level (Provincial DPRD) shall have at least 35 seats and no more than 100 , and of the House of Representatives of the district/municipal level shall have at least 20 seats and no more than 45.

Every political party that participates in the general elections can nominate its candidates for the membership of the DPR, Provincial DPRD, and District/Municipal DPRD for each electorate by taking the female representation at the minimum of 30 percent into account.

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To supervise the general elections, the Central General Elections Supervisory Committees, Provincial General Elections Supervisory Committees, District/Municipal General Elections Supervisory Committees, and Sub-District General Elections Supervisory Committees shall be established.

In the 2004 general elections, the personnel of the Indonesian Defense Force and the National Police had no rights to vote.

The General Elections Commission has determined April 5, 2004 as the 2004 General Elections Day.

Composition and Status of Legislature

The Preamble to the 1945 Constitution has stated that the state of Indonesia shall be in the form of Republic which in its implementation will adopt the principle of democracy guided by the inner wisdom of deliberation amongst representatives. To realize that, the legislative bodies shall be established to strive for the people's aspirations including regional ones in the frame of upholding democratic values.

In line with development of state affairs and national public, after the 1945 Constitution having been amended, the state organs have experienced a substantial change in their composition and status, including of the newly established regional representatives council.

Law No. 22 of 2003 concerning Composition and Status of the People's Consultative Assembly (MPR), the House of Representatives (DPR), the Regional Representatives Council (DPD), and the Provincial

and District/Municipal Houses of Representatives (DPRD), is enacted in the frame of improving the role and responsibility of the members of parliament/regional parliament in exercising their duty and authority, and developing the mechanism of checks and balances between legislative bodies and executive ones, as well as improving the quality, productivity, and performance of the members of those bodies for the sake of realizing the people's well-being.

Constitutional Court

Based on the amended 1945 Constitution, the Constitution Court is one of the state organs exercising an independent judiciary power to uphold law and justice according to its duty and authority. The existence of the Constitutional Court is also aim to keep state administration stability, as well as correction to the state affairs experience emerging in the past dual interpretation to the Constitution.

Considering that the Constitutional Court is one of the substantial parts to the 1945 Constitution, Law No. 24 on the Constitutional Court was enacted, regulating

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appointment and discharge of constitutional court judges, duty and authority, law of procedure, composition and status, and other provisions on the Constitutional Court.

The 24 Parties Taking Part in the 2004 General Election

The General Elections Commission determined the 24 parties that have passed the clarification. Therefore, they have the right to be the participants of the General Elections of the members of the House of Representatives, the Provincial Houses of Representatives and the District/Municipal Houses of Representatives. The parties are as fallows: 1. Marhaenism Indonesian Nationalist Party (Partai Nasional Indonesia Marhaenisme _PNI Marhaenisme), 2. Democratic Solidarity Labor Party (Partai Buruh Sosialis Demokrat _PBSD), 3. Crescent and Star Party (Partai Bulan Bintang _PBB), 4. Freedom Party (Partai Merdeka _PM), 5. United Development Party (Partai Persatuan Pembangunan _PPP), 6. Democratic Nationhood Unity Party (Partai Persatuan Demokrasi Kebangsaan _PPDK), 7. New Indonesia Alliance Party (Partai Perhimpunan Indonesia Baru _PIB), 8. Freedom Bull Nationalist Party (Partai Nasionalis Banteng Kemerdekaan _PNBK), 9. Democratic Party (Partai Demokrat _PD), 10. Indonesian Unity and Justice Party (Partai Keadilan and Persatuan Indonesia _PKPI), 11. Indonesian Democratic Vanguard Party (Partai Penegak Demokrasi Indonesia _PPDI), 12. Indonesian Nahdlatul Community Party (Partai Nahdlatul Ummah Indonesia _PPNUI), 13. National Mandate Party (Partai Amanat Nasional _PAN), 14. Concern for Nation Functional Party (Partai Karya Peduli Bangsa _PKPB) , 15. National Awakening Party (Partai Kebangkitan Bangsa _PKB), 16. Prosperous Justice Party (Partai Keadilan Sejahtera _PKS), 17. Reform Star Party (Partai Bintang Reformasi _PBR), 18. Indonesian Democratic Party of Struggle (Partai Demokrasi Indonesia Perjuangan _PDIP), 19. Prosperous Peace Party (Partai Damai Sejahtera _PDS), 20. Golkar Party (Partai Golongan Karya _Golkar), 21. Pancasila Patriot Party (Partai Patriot Pancasila _PPP), 22. Indonesian Unity Party (Partai Sarikat Indonesian _PSI), 23. Regional Unity Party (Partai Persatuan Daerah _PPD), and 24. Pioneer Party (Partai Pelopor _PP)

General Elections to Elect President and Vice President

According to the amended 1945 Constitution of the Republic Indonesia, Article 1 clause (2), it is stated that: "The sovereignty shall be vested in the people and shall be exercised in accordance with the Constitution. The amendment has a meaning that the people's sovereignty is no longer fully exercised by the People's Consultative Assembly (MPR), but shall be exercised in accordance with the stipulations of the Constitution. As one of the application of the sovereignty, there will be general elections to be executed to elect the members of the People's Consultative Assembly (MPR), the House of Representatives (DPR), the Regional Representatives Council (DPD) and the Regional Houses of Representatives (DPRDs) as well as another to elect the President and Vice President. Both the elections shall be executed in accordance with the Law as an implementation of a state based on law in the Unitary State of the Republic of Indonesia.

The first general elections to elect the President and Vice-President in 2004 is a political process for the Indonesian nation towards a democratic and responsible political life, and

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to elect the President and Vice President who have concrete support from the people. The general elections to elect the President and Vice-President shall be executed once in five years in direct, general, free, secret, fair and just manners and will be organized by a national, permanent and independent commission.

The candidate pairs who want to race in the general elections to elect the President and Vice President shall be proposed by a political party or a coalition of political parties which meet the requirements. The political party or a coalition of political parties shall only be able to, propose one candidate pair who meets the requirements of having a votes return minimum of 20 percent of valid votes in the national general elections to elect the House of Representatives members. This is meant that the political party as a means of people's political participation to propose candidates has made first selection for the candidate pairs of President and Vice-President.

The general elections supervision and monitoring are executed based on the principle of accountability. Supervision on the general elections to elect President and Vice-President shall be executed by supervisory committees for general elections at the level of province, district/city and sub-district. Whereas the General Election Commission (KPU) will handle violations and dispute settlements of general elections related with administration and procedures. The law enforcement of criminal provisions shall be done by the court of justice. The Constitution Court will settle disputes on the results of general elections to elect President and Vice-President.

General Elections Commission has determined July 5, 2004 as the date of the first round of general elections for President and Vice-President, and September 20, 2004 as the second round if it is deemed necessary. The determination of the result of the general elections for President and Vice-President took place on October 5, 2004.

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STATE AFFAIRS

When World War II broke out in Europe and spread to the Pacific, the Japanese occupied the Dutch East Indies as of March 1942, after the surrender of the Dutch colonial army following the fall of Hong Kong, Manila and Singapore.

On April 1, 1945, American troops landed in Okinawa. Soon after, on August 6 and 9, the United States dropped Atom bombs on two Japanese cities, Hiroshima and Nagasaki. A few days later, on August 14, 1945, the Japanese surrendered to the Allied Forces.

That occasion opened the opportunity for the Indonesian people to proclaim their independence. Three days after the unconditional Japanese surrender, on August 17, 1945, the Indonesian national leaders Ir. Soekarno and Drs. Mohammad Hatta proclaimed Indonesia's independence on behalf of the people.

The proclamation, which took place at 58, Jalan Pegangsaan Timur, Jakarta, was heard by thousands of Indonesians throughout the country because the text was secretly broadcast by Indonesian radio personnel using the transmitters of the Japanese-controlled radio station, Jakarta Hoso Kyoku. An English translation of the proclamation was broadcast overseas.

Pancasila, the State Philosophy

Pancasila, pronounced Panchaseela, is the philosophical basis of the Indonesian State. Pancasila consists of two Sanskrit words, "Panca" meaning five, and "sila" meaning principle.

It comprises five inseparable and interrelated principles. They are:

1. BELIEF IN THE ONE AND ONLY GOD

2. JUST AND CIVILIZED HUMANITY

3. THE UNITY OF INDONESIA

4. DEMOCRACY GUIDED BY THE INNER WISDOM IN THE UNANIMITY ARISING OUT OF DELIBERATIONS AMONGST REPRESENTATIVES

5. SOCIAL JUSTICE FOR WHOLE OF THE PEOPLE OF INDONESIA

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Elaboration of the five principles is as follows:

1) Belief in the One and Only God

This principle of Pancasila reaffirms the Indonesian people's belief that God does exist. It believe in life after death. It emphasizes the pursuit of sacred values will lead the people to a better life in the hereafter.

The principle is embodied in article 29, Section 1 of the 1945 Constitution and reads: "The state shall be based on the belief in the One and Only God.

2) Just and Civilized Humanity

Just principle requires that human beings be treated with due regard to their dignity as God's creatures. It emphasizes that the Indonesian people do not tolerate physical or spiritual oppression of human beings by their own people or by any other nation.

3) The Unity of Indonesia

This principle embodies the concept of nationalism, of love for one's nation and motherland. It envisages the need to always foster national unity and integrity. Pancasila nationalism demands that Indonesians avoid feelings of superiority on ethnical grounds, for reasons of ancestry and color of the skin. In 1928 Indonesian youth pledged to have one country, one nation and one language, while the Indonesian coat of arms enshrines the symbol of "Bhinneka Tunggal Ika" which means "unity in diversity."

4) Democracy Guided by the Inner Wisdom in the Unanimity Arising Out of Deliberations amongst Representatives

Pancasila democracy calls for decision-making through deliberations, or musyawarah, to reach a consensus, or mufakat. It is democracy that lives up to the principles of Pancasila. This implies that democratic right must always be exercised with a deep sense of responsibility to God Almighty according to one's own conviction and religious belief, with respect for humanitarian values of man's dignity and integrity, and with a view to preserving and strengthening national unity and the pursuit of social justice.

Thus, Pancasila Democracy means democracy based on the people's sovereignty which is inspired by and integrated with other principles of Pancasila. This means that the use of democratic rights should always be in line with responsibility towards God Almighty according to the respective faith; uphold human values in line with human dignity; guarantee and strengthen national unity; and be aimed at realizing social justice for the whole of the people of Indonesia.

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5) Social Justice for the Whole of the People of Indonesia

This principle calls for the equitable spread of welfare to the entire population, not in a static but in a dynamic and progressive way. This means that all the country's natural resources and the national potentials should be utilized for the greater possible good and happiness of the people.

Social justice implies protection of the weak. But protection should not deny them work. On the contrary, they should work according to their abilities and fields of activity. Protection should prevent willful treatment by the strong and ensure the rule of justice.

These are the sacred values of Pancasila which, as a cultural principle, should always be respected by every Indonesian because it is now the ideology of the state and the life philosophy of the Indonesian people.

The 1945 Constitution

The Constitution of the Republic of Indonesia is usually referred to as the 1945 Constitution. This partly is because the constitution was drafted and adopted in 1945 when the Republic was being established, and another to distinguish it from other constitutions which were introduced in free Indonesia.

Furthermore, the articles of the 1945 Constitution spell out the ideals and the goals for which independence was proclaimed on August 17, 1945, and defended thereafter.

It reflects the spirit and vigor of the time when the constitution was shaped. It was inspired by the urge for unity and for the common goals and democracy built upon the age-old Indonesian concepts of gotong royong (mutual assistance), deliberations of representatives (musyawarah) and consensus (mufakat).

The Main Materials of the Amendments to the 1945 Constitution

Since the reformation era, the 1945 Constitution has experienced some amendments, additions, and completion for four times in the annual session of 1999, 2000, 2001 and 2002. All the amendments were based on topics covering the following issues:

1. Sovereignty

The Constitution, the 1945 Constitution originally adhered an ideology that the sovereignty was vested in the people executed fully by the People's Consultative Assembly (MPR). It adhered an ideology of the People's Consultative Assembly supremacy, making the MPR be a state institution that had unlimited authority because it became an institution of the sovereignty embodiment of all Indonesian people. Its huge and unlimited power caused the People's Consultative Assembly was unable to be controlled by any other state institutions. Accordingly, the MPR became a super body state institution that in the structure of the matters pertaining to form of the government

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of the Republic of Indonesia was positioned as the highest state institution. To keep abreast to the changing era, the original 1945 Constitution views was no longer conforming to democracy ideology that required the implementation of checks and balances system among intra-state institutions. For that, its decree of the Article 2 section (1) were converted to the sovereignty is vested in the people and executed according to the constitution.

2. The Structure of the Membership Authority of the People's Consultative Assembly

Before the amendment, the structure of the membership of the People's Consultative Assembly consisted of member of the House of Representatives (DPR) including appointed members of the Indonesian Military/Police, the appointed Regional Delegates (RD), and Group and Delegates (DG). The members of the HR were elected in the General Election, while the RD and DG were appointed. The appointment of some members of the MPR was considered not conforming to with the teaching and spirit of democracy, therefore the formulation was changed by conforming that all members of the MPR have to be chosen by the people through general election. With this amendment, the structure of the membership of the MPR consists of the HR members and the Regional Representatives' Council members, a new representative institution in the structure of the matters pertaining to form of government of the Republic of Indonesia.

The MPR does no longer become the state institution having huge authority; the People's Consultative Assembly is no longer the highest state institution, so that its position makes it be equal with other state institutions.

3. The Authority of the President

The 1945 Constitution adheres presidential government system. Either in theoretic and practice of the matters pertaining to form of government in countries following the presidential government system by this constitution, the president has such a quite big and important power and role. So does in Indonesia. Therefore, it was logical that there were quite many materials related to the Presidential authority in the 1945 Constitution that spread over in various articles and sections, especially concerning his power begun from declaring war until granting abolition.

4. Direct Election of the President and the Vice-President by the People

Since the establishment of the Republic of Indonesia, the election of president and vice-president had been executed by the MPR by an indirect of representative mechanism. In accordance with the spirit of democracy that requiring the people are being given the right to elect the president and vice-president directly, so the current election system by the MPR has to be changed to the direct election system by the people.

If the conditions of the first round general election are not fulfilled, then the second round will be executed to appoint a candidate pair who has the majority vote from the first and

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second ranks. The couple that has the majority vote will be inaugurated as the president and vice-president.

5. The Term of Office of the President and Vice-President

Before having been amended, the formulation of the term of office of the president and vice-president in the 1945 Constitution was not decisive or concrete to arrange the frequency of the term. In consequence, it opened chance for more than one interpretation.

The amended 1945 Constitution sets that the president and vice-president hold the fixed term of five years and can be reelected for another term. It means that an Indonesian citizen is only being able to be voted for the president and/or vice president for 10 years consecutively.

6. The Discharge of the President and Vice-President on Posts

Prior, there was no decree in the 1945 Constitution which arranged the discharge of the president and/or vice-president from

their offices. The constitution only stipulated a decree on the accountability of the president before the extraordinary session of the MPR based on the invitation of the DPR. It is executed when the DPR considers the president is really violating the basic state guidelines or guidelines of state policy.

Now the amended 1945 Constitution embodies casual factors and procedures of discharging the president and/or vice-president from their offices.

7. The replacement of the President amid the Term by the Vice-President

According to the amended 1945 Constitution, the position of the Vice-President is to assist the President in discharging his/her duties. That position makes the Vice-President automatically shall replace the president until the end of his/her term if the president dies, resigns, and is discharged, or unable to discharge his/her duties during his/her term of office.

8. The Executor of the Presidential Duties

Although improbable, there remain another possibility of the emergency condition caused by, for example, the President and Vice-President at the same time die, resign, and are discharged, or are unable to discharge their duties of offices during on their terms. In this condition, prompt decision based on a strong law is needed.

Ancitipating such case the amended 1945 Constitution stipulates that in case that condition occurred, the executors of the presidential duties are that consisting of three cabinet members namely: the Foreign Affairs Minister, the Home Affairs Minister and the Defense Minister.

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9. The formation of the President Advisory Council and the Elimination of the Supreme Advisory Council

The existence of the Council as a state institution, which was equal with the president and had a task to give advice and judgment to the president was viewed as less effective and efficient. It was due to unbinding of the advice and judgment to the president.

Based on that consideration, the amended 1945 Constitution eliminates the existence of the Council. To substitute for it the constitution gives the authority to the President to form the Advisory Council that has the task to give advice and judgment to the President.

10. The State Ministry

As a constitution adhering to the ideology of presidential government system, the amended 1945 Constitution asserts that the state ministers, who are appointed and discharged by him/her, are to assist the President.

11. The Regional Government

The regions are given the freedom and authorities to exploit and manage their natural resources, with the yields emphasized regu

lates to raise the regional progress and prosperity. The regional autonomy has to be executed and remains within the Unitary State of the Republic of Indonesia.

The newly amended Constitution also regulates the state recognition of and respect for regional administration units, which is special and extraordinary in character.

12. The Regional Representative's Council

The amended 1945 Constitution introduces a new representative institution in the structure of the government of Indonesia. The institution is the Regional Representatives Council as stated in the provisions of the Chapter VIIA concerning the Council.

13. Financial Matters

Concerning with the increase of the awareness of the importance of the state financial management, the original 1945 Constitution was amended to be more details and perfectly managed.

Now, study of constitution draw of the budget that was proposed by the president and then executed together with the HR by taking note of the judgment of the Regional Representatives' Council.

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In the new chapter concerning the financial, it was also firmed that there is the tax arrangement and other collection of finance duty that are by force for the state needs, it is arranged in the new amended 1945 Constitution.

14. The Audit Board

In the new provision concerning the Board it is, among others confirmed that the AB as the state institution functions in the field of financial investigation, having the status of a free and independent. The confirmation is viewed as very important, so that the implementation of its duties is not intervened, influenced, or be under the pressure, either by the state institutions or boards or public and individuals.

The amended Constitution stipulates that besides locates in the capital city the Board also has a representative office in each province.

15. The Supreme Court

The amended constitution concerning the justice authority produces two new state institutions: Judicial Commission and Constitutional Court. The formation of those two institutions is aimed at strengthening the implementation of the justice authority to achieve the expected results to upholding the law and justice.

16. The Constitutional Court

The existence of the Court is viewed very important to implement the judicature function on cases related to the judicial review, inter-institutional arbitrariness disputes, political party dismissal, and results of the general election.

It is expected to be able to manifest the prompt court in order not to become a prolonged-term case.

The authority of the Court as enacted in the provision of the Article 24C of the 1945 Constitution is to judge in the first level and final, which decision is final.

17. The Judicial Commission

The judicial commission as a new institution is formed related to the implementation of the justice authority. With the formation of the Judicial Commission it is expected that the quality of the supreme judges and judges improve, and in turn it will improve the judicial process and judicial decision in the Commission as the highest judicial institution in the Indonesia judicial structure, except certain cases taken into court by the Commission.

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18. Human Rights

Along with the development of ideas concerning Human Rights, it is necessary to improve the formulation of the rights in the 1945 Constitution. The implementation of it is the inclusion of Human Rights in a separated chapter of the amended Constitution.

Concerning with the exercise of human rights there has been a non-retroactive principle confirming that the violation on human rights shall not to be charged on the ground of the retroactive law.

The retroactive principle shall be operative in the context of protecting human rights themselves.

In the provision concerning human rights it is also asserted that the responsibility to implement protection, development, upholding, and fulfilling of human rights is vested on the state, mainly the government.

19. The State Defense and Security

The 1945 Constitution stipulates that defense and security is carried out through total people's defense and security system by two state organs, namely the Indonesian Nation Army and the Indonesian Police, as the main force, and the Indonesian people as the supporting force. This formulation becomes a specific characteristic of the Indonesian national defense and security since it places the people to take part actively in the system.

20. Educations and Culture

It was formerly formulated in the 1945 Constitution that each citizen has the right to obtain education and the right to take basic education. So it becomes the government obligation to pay for each citizen acquisition of his/her elementary education.

After having been amended, the formulation of the provisions of the national education objectives improved by inserting the formulation of "improving faithfulness and devotation," "nobleness of character" and "advance the intellectual life of the nation". The inclusion of those three matters constitutes the realization of the collective awareness of the Indonesian nation as a religious nation, and nation having the wish to realize the national grandeur and noble civilization.

The national education budget prioritize is at least 20 percent of the state budget and the regional budget constitutes the answer to the reality that most part of the human resources belong to lower standards of education.

21. National Economies and Social Welfare

By examining carefully the dynamic of national economy and development of the global economy, formulation concerning the national economy contained in Chapter XIV Social

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Welfare, underwent some improvements by constitutional amendment to become Chapter XIV National Economy and Social Welfare. The change of the title has been viewed appropriate considering that the provisions encompass economy and social welfare.

Beside maintaining the formulation of the existing provision of Article 33, the amended 1945 Constitution inserted into it formulation about the national economy that shall be managed based on economic democracy with the principles of common endeavor, efficiency, fairness, persistence, friendly environmental vision, independence, and by maintaining the balanced proportion between the progress and the national economic entity.

22. The State Attributes

Before the amendment, the state attributes mentioned in the 1945 Constitution included only the State Flag (Article 35) and Indonesia Language as the state language (Article 36). Having been amended, the 1945 Constitution encompasses the "Garuda Pancasila" as the state symbol with the slogan "Bhineka Tunggal Ika" (Unity in Diversity) in Article 36A, and "Indonesia Raya" as the National anthem (the Article 36B).

23. The Amendment of the Constitution

One of the provisions considered important to be regulated in a constitution is a matter concerning amendment to the constitution itself. It aims that the next generations remain to have an opportunity and poses legal foundation to amend it to keep abreast with the changing era.

24. Transitional Provisions

The provision concerning the transitional provisions in the 1945 Constitution consists of 3 (three) articles aimed at regulating the transitional enforcement from ius constitutem (positive law in force) to ius constituendum (new law replaces it)

The transitional provisions are needed because each constitutional amendment (in the wider aspect of law amendment) will cause the transitional situation of the old constitution to the new one with the legal norms having been changing. The transitional provision is proportional, transitional, or interim in character.

In the transitional provisions embodied in the 1945 Constitution it is said that all existing provisions remain in force before being amended according to the Constitution. In addition is asserted that all existing state institutions remain functioning before being amended according to this Constitution.

25. Additional Provisions

The additional provision consists of 2 (two) articles that govern the task of the MPR to carry out judicial review on the materials and legal status of the provisions of the PCA

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and the PCA in relation with the MPR changing authorities as stipulated in Article 33 of the 1945 Constitution.

The provision of Article 11 Additional Provision asserts that by the enactment of the amendments to the 1945 Constitution, the 1945 Constitution consists of the Preamble and Articles. These provisions terminated the existence of the elucidation of the 1945 Constitution of which, before the 1945 Constitution amended, it was a part of this Constitution.

The National Flag

The Indonesian national flag is called "Sang Saka Merah Putih". As provided for in Articles 35 of the 1945 Constitution, the flag is made up of two colors, red on top of white. Its width is two-third of its length, or two meters by three meters. It is hoisted in front of the presidential palace, of government buildings and Indonesian missions abroad. The first flag was courageously flown amidst Japanese occupation forces on the day Indonesia's independence was proclaimed. Since then it has been hoisted at Independence Day commemoration in front of the presidential palace in the capital city of Jakarta. This historical flag, or "bendera pusaka", was flown for the last time on August 17, 1968. Since then it has been preserved and replaced by a replica woven of pure Indonesian silk.

The Coat of Arms

The Indonesian coat of arms consists of a golden eagle; called "garuda" that is a figure from ancient Indonesian epics. It is also pictured on many temples from the 6th Century.

The eagle is a symbol of creative energy. Its principal color, gold, suggests the greatness of the nation. The black color represents nature. There are 17 feathers on each wing, 8 on the tail and 45 on the neck. These figures stand for the date of Indonesia's independence proclamation: 17 August 1945.

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The motto, "Bhinneka Tunggal Ika" (Unity in Diversity), is enshrined on a banner held in the eagle's talons. Empu Tantular, a saint of the Majapahit Kingdom introduced this old Javanese motto, in the 15th century. It signifies the unity of the Indonesian people despite their diverse ethnic and cultural backgrounds.

The shield symbolizes self-defense in struggle and protection of oneself. The red and white colors on the shield's background denote the colors of the Indonesian national flag. The five symbols on the shield represent the state philosophy of Pancasila, the foundation of the Indonesian state.

The bar across the center indicates the equator, which passes through the islands of Sumatra, Kalimantan, Sulawesi and Halmahera. This is a reminder of the fact that the Republic of Indonesia is the only tropical country in which the people have built a free and sovereign state by their own hands.

The golden star on the black background in the center of the shield represents the first principle of Pancasila, belief in the One and Only God. The chain symbolizes successive human generations. The round links represent women and the square ones men. It is the symbol of the second principle, just and civilized humanity. The "beringin," or banyan tree, symbolizes the third principle, the unity on Indonesia. The head of the "banteng", or wild bull (Bos javanicus), which is black on a red background, represents the fourth principle, democracy guided by the inner wisdom in the unanimity arising out of deliberations amongst representatives. The fifth principle, social justice for the whole of the people of Indonesia, is symbolized by the gold and white paddy and cotton ears.

The National Anthem

The national anthem is "Indonesia Raya", which means Great Indonesia. The song was composed in 1928.

The colonial policy of the day was "divide and rule." It was a policy that deliberately aggravated language, ethnic, cultural and religious differences amongst the people.

The birth of Indonesia Raya marked the beginning of Indonesian nationalist movements. The song was firstly introduced by its composer, Wage Rudolf Supratman, at the second All Indonesian Youth Congress on October 28, 1928 in Batavia, now Jakarta. It was the moment when Indonesian youth of different ethnic, language, religious and cultural backgrounds resolutely pledged allegiance to:

1. One native land, Indonesia;

2. One nation, the Indonesian nation;

3. One unifying language, the Indonesian language.

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Soon the national song, which called for the unity of Indonesia, became popular. It was echoed at Indonesian political rallies, where people stood in solemn observance. The song seriously aroused national consciousness among the people throughout the archipelago Indonesia's National Anthem

State Organs

According to the amended 1945 Constitution, there are now 7 (seven) organs of the state:

1. The People's Consultative Assembly (Majelis Permusyawaratan Rakyat _MPR)

2. The Presidency

3. The House of Representatives (Dewan Perwakilan Rakyat _DPR)

4. The State Audit Board (Badan Pemeriksa Keuangan _BPK)

5. The Supreme Court (Mahkamah Agung _MA)

6. The Constitutional Court (Mahkamah Konstitusi _MK)

7. The Regional Representatives Council (Dewan Perwakilan Daerah _DPD)

The People's Consultative Assembly

Article 1 of the amended 1945 Constitution states that Indonesia is a unitary state which has the form of republic with the sovereignty vested in the people and shall be exercised in accordance with the constitution.

The Assembly has the authority to amend and stipulate the Constitution and to inaugurate the President and Vice-President. According to the amended the 1945 Constitution, the assembly is no more the highest political institution in the state. The Assembly does no longer elect the President and Vice-President, because the President and Vice-President in pair are elected direct by the people. The Assembly can only discharge the President and/or Vice-President during his/her term of office with due observance of the Constitution.

The membership of the Assembly consists of 550 members of the House of Representatives and the number of the members of the Regional Representatives Council, which is elected through the general elections. According to the amended 1945 Constitution, delegates of the regions and delegates of functional grouping will no longer be appointed to the membership of the MPR, as they were previously.

Pursuant to Decree Number VII/MPR/1998, the Chairmanship of the People's Consultative Assembly is made separate from that of the House of Representatives. According to the amended 1945 Constitution, the MPR Chairman is assisted by three

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vice-chairmen, who reflect the groupings in the DPR and DPD and are elected by and from among the members of MPR in an MPR Plenary Session. Current chairman of the Assembly is Hidayat Nur Wahid.

In fulfilling one of its tasks, the Assembly has taken the oath of Susilo Bambang Yudhoyono as president, and Mohammad Yusuf Kalla as Vice-President.

The Regional Representative Council

The Regional Representatives Council (DPD) is a regional representation institution with the status as a state institution. It is established pursuant to Article 22C of the 1945 Constitution and based on Law No. 22 of 2003 on structure and status of the People's Consultative Assembly (MPR), the House of Representatives (DPR), the Regional Representatives Council (DPD) and the Regional House of Representatives (DPRD). The establishment of DPD is aimed at enhancing the democratic life, securing people's regional representation in implementing their duty and authority, and developing a mechanism of check-and-balance between legislative bodies and executive ones and improving the quality, productivity and performance of the members of people's consultative/representative's bodies and the regions to realize justice and welfare for the people.

The DPD consists of regional representatives of the provinces who are elected through general elections. Electoral region for DPD members are the provinces, and the amount of DPD members for each province are 4 (four) persons, whereas total number of all DPD members shall not exceed 1/3 (one third) of the number of DPR members. The determination of DPD elected candidates is based on candidates' names who have the first, second, third, and fourth largest number in the concerned province. Candidates for DPD members should meet the requirements of: having been domiciled in concerned province at least for three consecutive years, which is counted until the date of submitting the candidacy or have been domiciled for ten years since he was 17 years old in the concerned province, and he/she is not being an organizer of a political party at least for four years, which is counted until the date of submitting the candidacy.

Where as the candidates who come from civil servants, the Indonesian Military/Police members, should resign themselve from their organizations/offices.

The DPD may submit to the DPR bills relating to regional autonomy, relationship between the central and regional government, establishment and development of new regions, natural and economic resources management which are related to the central and regional finance affairs. Accordingly, the DPD will also give considerations to the DPR concerning the bills on State Budget and the bills concerning tax, education, and religious affairs and perform surveillance on the implementation of the law and submit the results of surveillance to the DPR. The DPD shall hold session at least once in a year. The terms of office for the DPD is five years, and the DPD members shall be able to be dismissed from their position, the requirements and procedures shall be regulated by law.

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The Presidency

In the government system of Indonesia, the President is both head of state and chief executive. In exercising his/her duties, the President shall be assisted by a Vice-President.

According to the amended 1945 Constitution, the President and Vice-President in pair is elected direct by the people.

The President and Vice-President shall hold office for a term of five years and shall be eligible for re-election in the same position only for another term.

The President has the right to submit bills to the House of Representatives and determine Government Regulations to expedite the enforcement of laws.

The President and Vice-President can be discharged from office in mid-term by the People's Consultative Assembly, based on the proposal of the House of Representatives, either when he/she has been proved guilty of violating the law, such as betrayal of the state, corruption, bribery, or any other big crime, or indecent act, or he/she has been proved to be no longer fulfilling the qualifications of a President and/or Vice-President.

The House of Representatives

The total membership of the House of Representatives is five hundred and fifty (550) members, representing political organizations that took part in the general elections which are elected through general elections.

The House shall convene at least once a year. It shall have legislative function, budgetary function, and supervision function. In carrying out its functions the House shall also have the rights of interpellation, inquiry and expression of opinions. Besides those rights it shall have the rights to pose questions, submit suggestions and views, as well as the right of immunity. Further, members of the House shall have the right to submit a bill.

Decree No. VII/MPR/1998 regulates that the Chairman of the People's Consultative Assembly is made separate from Speaker of the House; current House Speaker is Agung Laksono.

The General Elections Commission has determined seats allocation for the House of Representatives by the amount of 550 seats for 32 provinces in Indonesia.

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South Sumatra Provincial House of Representative Building

The State Audit Board

The functions of the State Audit Board are outlined in Article 23E of the 1945 Constitution. Its main function is to conduct official examinations of government financial accounts. The findings of the Board are submitted to the House of Representatives, the Regional Representative Council, and the Regional Houses of Representatives in accordance with their respective authorities.

The Board should locate in the capital of the state and have representatives in every province. Current chairman of the Board is Anwar Nasution.

The Supreme Court

The Supreme Court and the subordinated judiciary institutions within the realms of the general court, the religions court, the material court and the administrative court are independent courts.

They shall exercise the judiciary power. The Supreme Court, according to Article 24A of the Constitution, shall have the authorities to hear appeal cases to review regulations below the level of laws to the laws concerned, and other authorities accorded by law.

Current chairman of the Court is Bagir Manan.

The Constitutional Court

The Constitutional Court shall have the authority to put on trial at the first and final instance, whose ruling irreversible, to review laws against the Constitution, to rule on conflicts of authorities among state institutions whose authorities are given by the Constitution, to decide the dissolution of political parties, and to settle disputes on the results of general elections.

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It shall also be obliged to rule on the opinion of the House on the assumption of violation by the President and/or Vice-President according to the Constitution.

The Court's current chairman Jimly Asshidiqie.

The Government Apparatus

The government apparatus have a decisive role in achieving successful implementations of general government affairs and development activities. Therefore, measures have been taken to include the execution of state apparatus supervision, the institutional and management refurbishment, the improvement of public services quality, and the enhancement of human resources capacity.

In this context there have been some schemes, including the State Apparatus Scrutiny Scheme, which aims to realize clean, respectable state apparatus that are free from cases of corruption, collusion and nepotism. In addition, there are main activities of the scheme aimed at: developing a transparent and accountable information system on supervision; improving the information quality of supervision system, which is integrated with the measure of enhancing the quality of planning, monitoring, controlling, and reporting; upholding ethics and morality of the government auditors, and following up transparent internal supervisory results, and reinforcing civil servants disciplinary regulations; implementing consistently Law No.28 of 1999 concerning the Management of State Affairs, which is free from corruption, collusion and nepotism and at the same time improving the role of the Commission Watch on the State Apparatus' Wealth; arranging and developing the system of Governmental Institutions' Performance Accountability as criteria for the success and/or failure of main tasks completion and function of government institutions; and striving efficiency in the inspectorial structure.

The other schemes are: the Institutional and Management Restructuring Scheme, which is designed to refurbish the state apparatus institutional and management system in the execution of general governmental task and development focused on the implementation of decentralization which is supported by a more efficient and effective documentary/archival management; the Improvement of Public Services Quality Scheme, which is intended to improve the quality of public services in various fields of public administration and development in consonance with the system of Governmental Institutions' Performance Accountability in central and regional administrations' working units; and the Improvement of Public Services Quality Scheme, which is aimed at enhancing quality, professionalism and skill of the state apparatus in performing their respective duties and functions in a more optimum way.

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The Indonesian Presidents

Soekarno, the First President

On August 18, 1945, the day after independence was proclaimed, the Indonesia's Committee for Preparation of Independence (PPKI) elected Soekarno by acclamation as first president of the young Republic with Hatta as vice-president.

Soekarno's address before the members of the Investigating Committee for Preparation for Indonesian Independence (BPUPKI) on June 1, 1945, outlined five principles called Panca Sila that later on developed to become the nation's basic philosophy contained in the Preamble of the 1945 Constitution.

In 1955, President Soekarno had to his credit the holding of the Asian-African Conference in Bandung, West Java. The initiative was taken by Indonesia, India, Pakistan, Myanmar and Ceylon (Sri Lanka). The conference was attended by delegates from 24 Asian and African countries. Also presences in the conference were Chou En-Lai of China, Nehru of India, and Nasser of Egypt. This was an important beginning for non-aligned movement.

In the same year Soekarno succeeded in holding Indonesia's first general election in which 47 political parties contested to elect their representatives for the House (DPR) and the People's Consultative Assembly (MPR).

On July 5, 1959 he issued a Decree for the reinstatement of the 1945 Constitution. This was followed by his announcement of a Political Manifesto on August 17. Later the Manifesto became the Guidelines of State Policy. Furthermore, his handpicked Provisional People's Consultative Assembly did resolve to make President Soekarno president for life.

Regarding Indonesia's claim to get back West Guinea, now Papua that was being occupied by Dutch troops, President Soekarno's stance was firm; he ordered to establish

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the "People Threefold Command" to liberate it. He also created the "Mandala Command for Liberation of the

West New Guinea." This move was bringing some tangible result which led to the negotiations between the Dutch and Indonesian Government in New York under the auspices of the UN to reach an agreement to settle the problem of Indonesia's claim to West Irian or West New Guinea.

The negotiations resulted in a resolution of the UN to administer the territory of West Irian for a period of one year to be ultimately officially transferred to the Republic of Indonesia. The people's "act of free choice" later resulted the West Irian's choice to remain with the Republic of Indonesia.

Considering the formation of Malaysia being the British Empire's puppet and satellite government, President Soekarno staged a confrontation against it. Diplomatic ties between the two countries, Indonesia and Malaysia severed as of September 3, 1964. At the time Malaysia was ultimately accepted as member of the UN Security Council, that President Soekarno ordered Indonesia's representatives of the UN to quit the organization.

On the 30th of September 1965 the Indonesian Communist Party (PKI) staged another coup which was however abortive failed by the Indonesian Armed Forces.

Later, Major General Soeharto emerged as the strong man of a new regime, and ordered the army to eliminate all traces of the Communist Party.

In March 1967 the MPR formally revoked Soekarno's governing authority and appointed Soeharto acting president, pursuant to the Provisional People's Consultative Assembly's Decree No. XLIV/1968.

Soekarno was put into house detention, before passing away in June 1970

Soeharto, the Second President

In July 1971, the second general election was held, and the functional group (Golkar) won 73 percent of the total seats in the House of Representatives (DPR).

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The 960-seat Assembly (MPR) unanimously re-elected Soeharto as president to a second five-year term on March 22, 1973. Sultan Hamengku Buwono IX was elected vice-president.

The nation's third general election was held on May 2, 1977. The ruling Golkar won 62 percent of the vote, and took control of 332 seats in the 460-member House of Representatives. On March 22, 1978 the MPR re-elected

Soeharto to third five-year term as president. Adam Malik was elected vice-president.

The nation's forth, fifth, sixth, and seventh general election had been held consecutively in 1982, 1987, 1992 and 1997. The Golkar emerged as the winning party at every national election with landslides

vote during the New Order government. Parallel with this, the MPR had re-elected Soeharto to the fourth, fifth, sixth, and seventh five-year term as president.

Indonesia under the New Order Government of President Soeharto had shown substantial achievement in many fields, which had been enjoyed by the majority of the Indonesian people. It had gained success in the national development, before severe economic crisis that began with monetary crisis hitting the country as of July 1997.

Such economy crisis caused substantial decline in the people's standards of living. Following suit was political crisis since the existing political system was unable to accommodate the dynamism of the aspirations and interests of the community. Students' street protests occurred frequently; they demanded political and economic reform as well as resignation of President Soeharto who had ruled the country for more than 32 years and eradication of corruption, collusion and nepotism. Pressure against President Soeharto to resign became so strong. Even the leadership of the House suggested Soeharto that he should resign.

Finally, Soeharto resigned on May 21, 1998, and he handed over the country's leadership to Vice-President B.J. Habibie.

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B.J. Habibie, the Third President

Habibie became the nation's third president. A day after having been inducted as President, he formed the Reform Development Cabinet, composing of various political and social forces, including politicians from the two minority parties, the United Development Party (PPP) and the Indonesian Democracy Party (PDI).

It was under the leadership of President Habibie the country's eighth general election taking place on June 7, 1999.

At the conclusion of its session, then the Assembly elected Mr. Abdurrahman Wahid after he outvoted four contenders including Megawati Soekarnoputri, who later was elected vice-president after overcoming Mr. Hamzah Haz. Abdurrahman Wahid secured 373 votes out of the total 691 against 313 votes gained by Megawati.

Earlier, the Habibie's administration reintroduced party system, by which forty-eight (48) political parties contested the election. The Indonesian Democracy Party of Struggle (PDI-P) got the top of the list, followed by its major contenders, i.e. Golkar Party, the National Awakening Party (PKB), the United Development Party (PPP) and the National Mandate Party (PAN).

It was under the Habibie Administration a number of political prisoners were released, freedom of expression by the people and press respected.

The MPR held general session in two stages, from October 1 to 3, and October 14-21, 1999. During the session the accountability address of President Habibie was rejected, and Habibie withdrew from his presidential nomination as a candidate from the Golkar Party.

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Abdurrahman Wahid, the Fourth President

Abdurrahman Wahid, better know as Gus Dur, indisputably became Indonesia's fourth president. Internationally acclaimed moderate Moslem leader, he is one of the National Awakening Party's founders. He started his political career in 1984 when he was elected chairman of the Nahdlatul Ulemas Islamic Organization.

The people's earlier expectations and hope upon President Abdurrahman Wahid to be able to restore the prolonged crisis was high enough. But it proved that during his one year and nine months in office he failed to recover the economic as well as political crisis. Even his image started to fade away, especially when he was suspected to have a connection with the so-called "Buloggate" and "Bruneigate" extortion.

Relations between the House and President Abdurrahman Wahid became sour and severe because the House regarded Abdurrahman Wahid failed to execute the constitution properly and to administer good governance. For this, the House sent letters of warning in the form of "Memorandum" I and II to him and demanded him to give explanations to Parliament. But on the other hand, President felt his administration had governed in conform with the constitution, so he ignored the summon from Parliament to give explanations. Instead, he declared a state of emergency that would be effective as of 6 p.m. on July 31, 2001, and suspended the MPR, DPR and Golkar Party.

In respond to the actions made by President Wahid, the MPR immediately held a special session during which it discharged Abdurrahman Wahid as president and appointed Vice-President Megawati Soekarnoputri the fifth president of the Republic of Indonesia.

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Megawati Soekarnoputri, the Fifth President

On July 23, 2001, Diah Permata Megawati Soekarnoputri took an oath of office of President of the Republic of Indonesia. She served his term of office until October 20, 2004.

However, it was only on August 9, 2001, President Megawati could announce members of her Cabinet named "Kabinet Gotong Royong" (Mutual Cooperation Cabinet). Her cabinet consists of three coordinating ministers, 18 ministers with portfolio, nine state ministers, and two high officials enjoying ministerial level.

So far, Megawati _the eldest daughter of Soekarno, the first Indonesian president_ and her cabinet have tried hard to first of all stabilize the country and to recover the nation's economy from severe crisis.

During her tenure, Megawati succeeded in not only improving substantially macro-economic performance, maintaining socio-political stability, but also in managing fairly arduous, complicated but peaceful, fair and democratic general elections of members of legislature and President and Vice-President in 2004. She surrendered the presidential post she served for more than three years, to her predecessor Susilo Bambang Yudhoyono.

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SUSILO BAMBANG YUDHOYONO, the SIXth President

Susilo Bambang Yudhoyono, retired Army general, was officially inducted by the People's Consultative Assembly, and took his oath of office, on October 20, 2004, to become the sixth President of the Republic of Indonesia, replacing Megawati Seokarnoputri following his landslide victory _by garnering more than 60 percent of total valid votes in the nation's first-ever direct presidential election.

The installment itself was also attended by heads of governments of and special envoys from some foreign countries _the first installment of an Indonesian President attended by foreign envoys. Heads of foreign Governments at ending the installment of President Susilo Bambang Yudhoyono were newly elected Australian Prime Minister John Howard, Malaysian Prime Minister Abdullah Ahmad Badawi, Brunei Darussalam Sultan Hassanal Bolkiah, Singaporean Prime Minister Lee Hsien Loong, Timor Leste Prime Minister Mari Alkatiri, and special envoys from Japan, Thailand, South Korea and the Netherlands

President Susilo Bambang Yudhoyono was proposed to be a candidate for the President, pairing with Mohammad Jusuf Kalla as his running mate, by his party, the Democratic Party.

Before becoming President, Susilo Bambang Yudhoyono was once Minister of Energy and Mineral Resources under the Abdurrahman Wahid Administration, and Coordinating Minister for Political and Security Affairs under the Cabinet of Megawati Sukarnoputri before quitting to contesting for the presidency. Under the administration of President Soeharto, he was considered among the Army's rising stars and one of the architects of reform in the military.

He graduated from the Military Academy in 1973 before earning a master degree in management from Webster University in the United States of America, and recently completing his doctorate with the Bogor Institute of Agriculture.

Broad education and experiences during his military and public services he holds are regarded as his advantages to lead the country to a better situation and condition.

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"INDONESIA BERSATU" (UNITED INDONESIA) Cabinet

The first Indonesian President elected by direct popular votes, President Susilo Bambang Yudhoyono inducted his cabinet called as the United Indonesia Cabinet, consisting threee coordinating ministers, 18 ministers with portfolios, 11 state ministers, and three high officials with status of state ministers, on 21 October, 2004 at Presidential Palace.

Listed below is the line up of the cabinet:

Coordinating Ministers:

1. Coordinating Minister for Political, Legal, and Security Affairs: Widodo A.S., S.I.P.

2. Coordinating Minister for the Economy: Ir. Aburizal Bakri

3. Coordinating Minister for People's Welfare: Prof. Dr. Alwi Shihab

Ministers with Portfolios:

4. State Secretary: Prof. Dr. Yusril Ihza Mahendra

5. Minister of Home Affairs: H. Moh. Ma'ruf, S.E.

6. Minister of Foreign Affairs: Dr. Nur Hassan Wirajuda

7. Minister of Defense: Prof. Dr. Juwono Sudarsono

8. Minister of Justice and Human Rights: Dr. Hamid Awaluddin, S.H.

9. Minister of Finance: Dr. Jusuf Anwar

10. Minister of Energy and Mineral Resources: Dr. Ir. Purnomo Yusgiantoro

11. Minister of Industry: Dr. Ir. Andung Nitimihardja

12. Minister of Trade: Dr. Marie Elka Pangestu

13. Minister of Agriculture: Dr. Ir. Anton Aprianto, M.S.

14. Minister of Forestry: H. M.S. Kaban, M.Si.

15. Minister of Transportation and Telecommunication: Ir. M.Hatta Rajasa

16. Minister of Maritime Affairs and Fisheries: Freddy Numberi

17. Minister of Manpower and Transmigration: Drs. Fahmi Idris

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18. Minister of Public Works: Ir. Joko Kirmanto, Dipl.H.E.

19. Minister of Health: Dr. Fadilah Supari

20. Minister of National Education: Prof. Dr. Bambang Sudibyo, M.A.

21. Minister of Social Affairs: Dr. H. Bachtiar Chamsyah

22. Minister of Religious Affairs: M. Maftuh Basyuni

23. Minister of Culture and Tourism: Ir. Jero Wacik, S.E.

State Ministers:

24. State Minister for Research and Technology: Dr. Kusmayanto Kadiman

25. State Minister for Cooperatives and Small/Medium Enterprises: Drs. H. Suryadarma Ali, M.Si.

26. State Minister for Environment: Ir. Rahmat Witoelar

27. State Minister for Women Empowerment: Dr. Meutia Farida Hatta Swasono, S.S., M.A.

28. State Minister for Administrative Reform: Drs. Taufiq Effendi, M.B.A.

29. State Minister for the Accelerated Development of Disadvantaged Regions: Dr. Saifullah Yusuf

30. State Minister for National Development Planning/Chairman of the National Development Planning Board: Dr. Sri Mulyani Indrawati

31. State Minister for State-Owned Companies: Sugiharto, S.E., M.B.A.

32. State Minister for Communication and Information: Dr. Sofyan A. Djalil, S.H., M.A., MADD.

33. State Minister for Public Housing: Drs. Muhammad Yusuf Asy'ari, A.K., M.Si.

34. State Minister for Youth and Sports: Adhyaksa Dault, S.H., M.Si.

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High-ranking Official with the Status of State Minister:

35. Attorney General: Abdul Rahman Saleh, S.H., M.H.

The 100-Day Working Program of "Indonesia Bersatu" Cabinet

The United Indonesia Cabinet's 100-day working program, an inseparable part of the Cabinet's middle-term development program for the next five years, contains concrete measures to respond to public high expectations over the government of the newly inducted President Susilo Bambang Yudhoyono. However, a number of urgent matters that are considered routine and already going on well are excluded from the 100-day program. Meanwhile, the cabinet's middle-term development program itself is scheduled to be introduced to the House of Representatives in January 2005 to be made into a law.

The short-term program covers a wide-range of activities in many fields. They include maintaining security and order, and creating a tranquil situation in some conflict-torn areas, such as in Mamasa (West Sulawesi), North Maluku, Poso, and building and fostering trust among inter-communal groups in those places. Other activities are to cope with separatist movements in the provinces of Nanggroe Aceh Darussalam and Papua; to uphold law enforcement at the country's territorial waters, and to combat illegal logging, illegal fishing, and smuggling of sea-sand and tin-sand; to augment the nation's resilience against terrorism, and to fight terrorism as well as to improve institutional bodies dealing with terrorist acts.

The program also urges on the maintenance of conducive situation during the commemoration of religious events of Idul Fitri (Islamic feast at the end of the Ramadhan fasting month) and Christmas, and the anticipation of possible floods during the rainy season (October 2004-March 2005).

Prominent in the short-term program is the eradication of corruption, including serious handlings of corruption cases, that have the potential to retrieve embezzled state money, and the provision of sufficient attention over the establishment of courts for corruption criminal acts, on their authorities, personnel, and finance; the formation of a commission tasked to control public prosecutor offices; and the reform of governmental administration system (bureaucracy).

On the creation of job opportunities and the protection of workers, the 100-day working program puts emphasis on the improvement of regulations and ministerial decisions to make them capable of creating a more flexible manpower market; the protection and the repatriation of Indonesian migrant workers from Malaysia; the close monitoring over some organizations that possibly do massive lay-off; the payment of Idul Fitri and Christmas allowance; and the formation of an independent Professional Certification National Body.

Regarding macro-economy, the 100-day program impels on the prudent execution of the 2004 State Budget; and on the review of the 2005 State Budget.

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On investment, the program stresses the review of regional regulations and taxes which are considered impeding investment; and the improvement of competitive edge of industrial products, and the protection of small-scale depositors.

In dealing with education, the program drives for the improvement of the implementation of the nine-year compulsory education system; the provision of qualified skills and entrepreneurship education; the improvement of educators' professionalism; and the establishment as well as equitable distribution of educational facilities and infrastructures.

As far as the business world is concerned, the program seeks to enhance the provision of various tax incentives and trade facilities for business players; and the protection of manufacturing industrial establishments as well as the encouragement of industrial establishments in the regions.

Susilo Bambang Yudhoyono takes official oath as President of the Republic of Indonesia before the Assembly

Touching on health care, the program aims on the provision of free-of-charge health care services by third-class hospitals; and the purification of drinking water.

On poverty alleviation, the program spurs the Cabinet on the provision of access and guarantee on rights over land plots for people belonging to economically-weak bracket.

Last but not least, the program encourages the improvement of hajj pilgrimage services and the provision of free meals for nine days during the pilgrimage in Saudi Arabia. commission tasked to control public prosecutor offices; and the reform of governmental administration system (bureaucracy).

On the creation of job opportunities and the protection of workers, the 100-day working program puts emphasis on the improvement of regulations and ministerial decisions to

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make them capable of creating a more flexible manpower market; the protection and the repatriation of Indonesian migrant workers from Malaysia; the close monitoring over some organizations that possibly do massive lay-off; the payment of Idul Fitri and Christmas allowance; and the formation of an independent Professional Certification National Body.

Regarding macro-economy, the 100-day program impels on the prudent execution of the 2004 State Budget; and on the review of the 2005 State Budget.

On investment, the program stresses the review of regional regulations and taxes which are considered impeding investment; and the improvement of competitive edge of industrial products, and the protection of small-scale depositors.

In dealing with education, the program drives for the improvement of the implementation of the nine-year compulsory education system; the provision of qualified skills and entrepreneurship education; the improvement of educators' professionalism; and the establishment as well as equitable distribution of educational facilities and infrastructures.

As far as the business world is concerned, the program seeks to enhance the provision of various tax incentives and trade facilities for business players; and the protection of manufacturing industrial establishments as well as the encouragement of industrial establishments in the regions.

Touching on health care, the program aims on the provision of free-of-charge health care services by third-class hospitals; and the purification of drinking water.

On poverty alleviation, the program spurs the Cabinet on the provision of access and guarantee on rights over land plots for people belonging to economically-weak bracket.

Last but not least, the program encourages the improvement of hajj pilgrimage services and the provision of free meals for nine days during the pilgrimage in Saudi Arabia.

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President Susilo Bambang Yudhoyono Vice-Pr

Members of the United Indonesia Cabinet pose for a photograpPalace

esident Mohammad Jusuf Kalla

h in front of Merdeka

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Dumai from previously a fishing village to a modern town

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REGIONAL DEVELOPMENT

Policy on regional development underlines the development of regional autonomy focusing on the creation of balance in financial proportion between the central and regional administrations; improvement of managerial institutions of regional administrations; betterment of personnel and public service management; enhancement of competency of regional government apparatus; and empowerment of the Regional Houses of Representatives or regional legislative bodies. The policy covers 20 regional development schemes as Law No. 25 of 2000 regulates, and are divided into four major programs, namely the regional autonomous development program, area development program, empowerment of communities program, and special development program for the provinces of Nanggroe Aceh Darussalam, Papua, and Maluku.

The regional development comprises the Regional Government Apparatus Promotion scheme, the Regional Government Institutions Development scheme, the Regional Financial Development scheme, the Non-Governmental Institutions Promotion scheme, the Regional Economic Development scheme, the Strategic Areas Development scheme, the Rural and Urban Development scheme, the Housing Development scheme, the Less-developed Areas Development scheme, the Development scheme of Areas at Borderlines with few neighboring countries, the Development scheme of Spatial Management, the Land Management Development scheme, the Social-Organizations Promotion scheme, the Empowerment of Poor People Development scheme, the Community's Alertness Promotion scheme, and the Special Management of Aceh, Papua, and Maluku.

In implementing the policy on regional development, measures adopted as of 2001 included the maintenance of the nation's unity and integrity, the continuation of reformation and democratization, and the improvement of regional economy.

The decentralization policy, which is pursuant to Law No. 22 of 1999 on Regional Administration and Law No. 25 of 1999 on Financial Sharing between Central and Regional Administrations, has been so far formulated through phases consisting of the Initiation Phase in 2001, the Installation Phase during the period of 2002-2003, the Consolidation Phase during the period of 2004-2007, and the Stabilization Phase after 2007.

Law No. 22 of 1999 on Regional Administration allows extensive, concrete, and responsible execution of regional autonomy based on the principles of democracy, people's participation, equality and justice, as well as the potentiality and plurality in the provinces. Law No. 25 of 1999 on Financial Sharing between the Central and Regional Administrations meanwhile governs the regional governments in performing their tasks.

Pursuant to Law No. 25 of 1999 and Government Regulation No. 104 of 2000, the allocation of profit-sharing fund of oil and gas for regional administrations is determined at 15 percent and 30 percent respectively from the revenue after taxes. Pertaining to the Province of Nanggroe Aceh Darussalam (NAD), the allocation of profit-sharing fund from oil and gas for the province is 70 percent each, but in nine years the ratio will be

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reduced to 50 percent each. Further, Chapter 7 of Law No. 25 of 1999 regulates the ratio of budget between Central and Provincial Governments, in which the general allocation fund is fixed at a minimum of 25 percent of net domestic revenue minus profit-sharing fund and special allocation fund derived from reforestation fund.

Revenues apportioned for provincial and local governments are derived from taxes and natural resource revenues. The 2004 state budget allocates some 31.8 percent of central government expenditures for provincial and local governments, a slight decrease from that of 2001 which was 32.2 percent.

Regional Autonomy

The implementation of decentralization and regional autonomy policy based on Law No. 22 of 1999 concerning Regional Administration has caused changes in the paradigms that contained in the concept of regional autonomy. The regional autonomy gives a greater role and participation of regional (district) administrations to manage their regions, and conversely decrease the role and participation of province and central government. The change of this function and role, as regulated in Law No. 22 of 1999 concerning Regional Autonomy covers some regional administration instruments, such as regional administration construction, head of region accountability, filling the position of head and deputy head of regions and policy making concerning the region.

The background and goals of which underlaid the writing of Law No. 22 of 1999 on Regional Autonomy are: first, to give an extensive autonomy to the region in anticipation of the rapid growth of social affairs, politics and economy that need fast and accurate response; secondly, to enhance people's participation, just and equitable, self-reliant, exploring regional potentials in the process of the development which is based on the principle of democracy; and thirdly, to maintain the integrity of the Unitary State of the Republic of Indonesia, and to promote a dynamic sense of unity and cohesion, which is still processed creatively in line with temporal change.

According to the law, the regional administration will receive some power delegation or decentralization from the central government. District/city or municipality up to the province will manage their regions according to its relevance, significance and capacity to execute the authority. Article 7 of Law No. 2 of 1999 says that the authority of the regional administration covers the authority in all government aspects, except those of defense foreign policy, monetary, fiscal and religious affairs. Meanwhile, the authorities to be executed by a regional administration are among others: public works, health, education and culture, agriculture, communication, industry and trade, investment, environment, land affairs, cooperatives and manpower. The reposition and redefinition of government administration in the region shall be understood clearly to reach the goals of the regional autonomy. That reposition has also influenced the regional administration accountability which is previously is in vertical manner, i.e. to the President through the Minister of Home Affairs. Subsequently, based Law No. 22 of 1999, the accountability will become horizontal, i.e. to the Regional House of Representatives (DPRD). With

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these new procedures, it is hoped that the supervisory function of the legislative will run smoothly

In the regional autonomy, the provincial tax revenue will be shared with the districts/cities or municipalities. In the case, the regional administration will receive all fund received from Tax on Land and Building (PBB), while the 10 percent of the central government share will be distributed back to the region, both in the from of average and proportional computation. Meanwhile, 20 percent of personal income tax and corporate income tax, will be given to the region, with the distribution of 8 percent for the province and 12 percent for districts/cities. The central government has also given share to the provinces state revenues from the exploitation of natural resources of forestry, general mining, fishery, oil and gas mining and natural gas. In line with the principle of justice, the share will be divided not only to the producer-region, but also to the non-producer regions that are situated in the neighboring areas within the province. Besides taxes, the region will also receive fund from the State Budget (APBN), the General Allocation Fund (DAU) and the Special Allocation Fund (DAK)

Expansion of Regional Administrations

Parallel with on-going political dynamism of development and in accommodating public aspirations, several provincial and local (district and municipal) administrations came into being, and were put into the state system. Up to 2004 there have been six new provinces added to the system to make the country's total provincial governments 32, along with 80 new district administrations to total 349, and six new municipal administrations to number 91 in total.

Developing Less Developed Areas

Disparities, particularly in economic and welfare term, are tangible and common between the relatively more-developed regions in the country's western part and the relatively less-developed regions in the country's eastern half, between those of relatively more-developed urban areas and the relatively less-developed rural areas, and between the relatively advanced Java Island and the less-advanced outer-Java. Regional developments are among other things aimed at addressing and dealing with such unfavorable conditions and simultaneously boosting regional economic growth rate, including regional gross domestic products (RGDP), improving economic infrastructures and facilities etc. of the less-developed areas to make them on par with the relatively more-developed areas.

The areas that also receive development priority are of areas near and along the borderlines with the neighboring countries such as with Malaysia in Kalimantan, with Papua New Guinea in Papua, and with Timor Leste in East Nusa Tenggara. In fact there are some problems to deal with seriously among other things: a lackluster of control due to primarily unavailability of sufficient infrastructures and facilities; still not definitive border marks, unavailability of integral national policy to develop areas along the borderlines and of coordination between the central and regional administrations. Also conditions hampering the development of the areas are limited domestic funds to

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accompany foreign investment; bilateral cooperation still takes the form of ad hoc nature and valid for certain areas; welfare disparity between domestic people

Downtown Palembang city, South Sumatra

living along the borderlines and those across such as in Kalimantan; rampant smuggling of people and natural resources; limited availability of infrastructures and facilities in offices of local security, immigration and custom as well as quarantine services, and crossing points.

Therefore the main aims of the development of areas near and along the borderlines are to improve the living standard of the people of these areas, to enhance managerial capacity to exploit potentialities the border areas have, and to maintain the areas' security and order. To achieve such conditions, there have been action plans to be executed, including to set out integrally development of border areas, to maintain the security and order at border areas, such as in Kalimantan, Papua, and East Nusa Tenggara, to arrange spatial management of land and seas at border areas, to encourage the development of growth centers at areas near and along borderlines, to promote potential resources the areas near borderlines have, to improve bilateral cooperation with neighboring countries in the fields of security, economy and management of natural resources and environment, to empower socio-political, and economic institutions and non-governmental organizations, and to improve infrastructures and means of security, immigration and custom and quarantine offices, as well as to better infrastructures and means of transport, education and health.

Up to 2004 some regional development programs have been carried out, including the complete arrangement of measures and strategies as well as planning of spatial management of areas near borderlines, the organization of bilateral meetings with some foreign parties from neighboring countries like Malaysia, the Philippines, Papua New Guinea, and Timor Leste through various fora, the execution of economic cooperation through investment for development of special areas in the districts within the Provinces

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of West and East Kalimantan under the Malindo socio-economic framework., and many others. At the same time database on areas along borderlines have been composed and built up, and information and charts of areas along borderlines and the most outer islands and islets have been made available.

ISSUES ON THE PROVINCES OF ACEH, PAPUA, AND MALUKU

The national issues the Government has been giving serious attention to are those pertaining to problems of security and order in the provinces of Nanggroe Aceh Darussalam (NAD), Papua or Irian Jaya, and Maluku.

A main problem the province of NAD administration has been facing is on security matters caused by a rebellious armed movement calling themselves the GAM (Gerakan Aceh Merdeka the Aceh Freedom Movement) that has hampered the province's socio-economic and administrative activities, thus impeding almost all development activities. The security problem has also forced many people to flee to more secure and tranquil areas, causing the implementation of Law No. 18 of 2001 on Special Autonomy Status for the province of NAD crippled and ineffective, and hampering the development and rehabilitation of transport infrastructures and facilities as an important economic mover.

In dealing with such unfavorable situation and condition, the Central Government along with the Provincial Administration of NAD, have introduced the development acceleration schemes to make the province more conducive to allow all aspects of life including legal certainty, human rights, and status of special autonomy run normally as they should. So far, the schemes have been bearing fruit, for instance there are some regional regulations adopted to support the implementation of Law on Special Autonomy Status of NAD, and the Law has been socialized to people at large.

Regarding the province of Papua, things that to some extent impede developments in this province are among other things unfavorable condition and situation of internal security and order due to frequent armed conflicts among tribes, and between the Indonesian Armed Forces and the rebellious armed group of OPM (Free Papua Organization), its geography that is rather too rough to facilitate the development of economic infrastructures and facilities, the lackluster implementation of Law No. 21 of 2001 on Special Autonomy of the Province of Papua, rather less-developed socio-culture of native tribes, etc.

The main aims of the development acceleration scheme are to encourage the local people to take part more actively in development activities, to improve the capacity of the local governmental institutions, to settle more quickly cases of human rights abuses, and to expedite the implementation and operation of Law No. 21 of 2001 on Special Autonomy of the Province of Papua. The main goals of the scheme are the availability of qualified human resources, and the good functioning of local governmental institutions to provide public services in the context of maintaining security and order, and peace, and improving welfare and justice; the settlement of cases of human rights abuses; and the improvement of welfare of the Papuan people.

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One of supermarkets available in Banda Aceh, Nanggroe Aceh Darussalam Province

It is hoped that under the scheme Law No. 21 of 2001 would serve as it is envisaged, regional administrative services run more effectively and efficiently, development activities go well as they are planned, the welfare of the local people improves meaningfully, the people's economic activities flourish, and their education level advances, and the people's health condition sound, etc.

Meanwhile the main aims of the development acceleration scheme for the provinces of Maluku and North Maluku are to maintain security and order, and to recover comprehensively the feeling of the local people from traumatic insecurity and gross fear of previous bloody social conflicts. The goals of the scheme are the resumption of normal life of the local people and the refurbishment of socio-economic as well as public infrastructures and facilities, as well as the settlement of cases of human rights abuses.

The scheme has been designed as well to reconcile the hostile parties, and to normalize the life of the local people through dialogues and peaceful agreements, to strengthen the communities' resistance against any provocation from within and without, to intensify religious guidance and preaching, to recover socio-economic life, to restore damaged infrastructures and facilities of education and health as well as to activate schooling, including schooling for children in refugee camps, and to grant financial assistance to refugees, etc.

Under the scheme and with the issuance of Presidential Instruction No. 6 of 2003 on the Post-conflict Accelerated Development Recovery for the province of Maluku and North Maluku, the local socio-economic conditions has been showing an encouraging trend, marked by the lifting of civil emergency status, the growing number of refugees who have returned to their hometowns or villages, and the normalization of local governmental administrative activities.

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THE LAW

Legal developments during the recent years have been focusing on the promotion of law supremacy and improvement of good governance, to be executed through four development programs: the Legislation Formulation Program; the Empowerment of Judiciary and other Law Enforcement Institutions Program; the Program for the Settlement of Cases of Corruption, Collusion and Nepotism and Human Right Abuses; and the Program for the Enhancement of Legal Awareness and Development of Legal Culture among the People.

In the context of reinforcing law supremacy, the 1999-2004 Guidelines of State Policy gives directions to promoting legal affairs as follows: 1) to develop legal culture to all levels of society to make them have legal awareness and obedience within the frame of upholding law supremacy and a law state; to arrange a comprehensive and integrated national legal system by recognizing religious and traditional laws, and replacing statutory regulations inherited from the Dutch colonial government as well as discriminative laws, including those related to gender; to uphold consistently regulations to secure legal certainty and respect to human rights; to continue ratifying international conventions, particularly those pertaining to human rights, suitable with the need and interests of the nation; to improve moral integrity and professionalism of law enforcers, including the Police of the Republic of Indonesia, to cultivate the public's trust in them by improving their welfare, supportive means and facilities, education and control; to realize independent legal institutions that are free from interference by any party whatsoever; to develop statutory regulations conducive to economic activities in facing the free trade era without hampering national interests; to manage fast, low-cost operations, and corruption-collusion-and nepotism-free judicial process by upholding the justice and truth principles; to nurture legal understanding and consciousness, and to promote the protection, respect to and enforcement of human rights in all aspects of life; and to settle completely various judicial processes on unsettled abuses of laws and human rights.

In relation with the legislation formulation program, a number of laws pertaining to various areas have been enacted and promulgated.

On intellectual property rights, there has been put into force Law No. 30 of 2000 concerning Trade Secrecy, Law No. 31 of 2000 concerning Industrial Design, Law No. 32 of 2000 concerning Integrated Circuit Lay-out Design, Law No. 14 of 2001 concerning Patent, Law No. 15 of 2001 concerning Trademark, and Law No. 19 of 2002 on Copyright. On monetary and tax, several laws have been enacted, among other things Law No. 3 of 2004 on Amendment to Law No. 23 of 1999 concerning Bank Indonesia (Indonesia's Central Bank), and Law No. 17 of 2002 on Amendment to Law No. 7 of 1983 concerning Income Tax as well as Law No. 14 of 2002 on Tax Tribunal. Regarding money laundering, Law No. 25 of 2003 concerning Money Laundering Criminal Acts has been put into force. So has Law No. 30 of 2002 concerning Commission for Corruption Crime Eradication. As regard to judicial authority, there are Law No. 24 of 2003 on Constitutional Court, Law No. 4 of 2004 on Judicial Power, Law No. 5 of 2004 on Supreme Court, etc. Pertaining to human rights, there are Law No. 1 of 2000 on

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Ratification of International Labor Organization Convention No. 182 (concerning the Prohibition and Immediate Action For the Elimination of the Worst Form of Child Labor), and Law No. 26 of 2000 on Human Rights Court.

In the context of developing the national legal system, studies have been done to cover five issues: 1) legal matters on economic reform and regional autonomy; 2) direct election of president; 3) law on the Constitutional Court; 4) laws on foreign investment in the framework of the World Trade Organization; and 5) laws on private court in the system of free foreign exchange.

In addition, legal researches have been conducted to include Legal Aspects of the Implementation of the Rights of the House of Representatives in the context of controlling government management; Legal Aspects of the Settlement of BLBI (Bank Indonesia Liquidity Support) by banks; and Legal Aspects of Credit Reconstruction in stimulating the real sector. It has been endeavored as well to arrange bills on Police Acts against Legislators, on Banking Reconstruction, on Ombudsmen, on State-Owned Enterprises, and Amendment to Law No. 9 of 1990 concerning Tourism.

In view of empowering judiciary and other law enforcement institutions, various activities have taken place to include promotion of public courts and state administrative courts at central and regional levels, legal assistance, improvement of legal service facilities at central and regional levels, improvement of trainings for justices, promotion of correctional institutions, of immigration and customs, and projects planning and control.

So far there are 321 legal technical organizing units, and 399 permanent court halls, manned by 2,773 justices.

In overcoming the shortage of justices in conflict-torn areas, 154 justices have been assigned to 47 courts of first level in those areas. In addition, 50 justices have been appointed under crash-program recruitment to fill the posts in those areas.

On immigration matters, a special measure has been adopted that allows citizens of the People's Republic of China wanting to visit Indonesia to get visa from all Indonesian representative offices abroad without prior approval from the Directorate-General of Immigration of the Republic of Indonesia. In addition, the obligation for visitors from troubled countries to show US$ 2,000 in their possession when entering Indonesia, has been lifted.

Much more attentions have also been given to the fight against the drugs abuses, by among other things setting up 13 special correctional institutions for drugs convicts in 13 cities and towns.

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Human Rights

Under Law No. 39 of 1999, the National Commission on Human Rights came into being to among other things promote and maintain human rights and help settle human right cases arising in the public. Further, under Law No. 26 of 2000, the Human Rights Court is established. This law in principle accommodates conventions of Rome Statute that contains definitions of international crimes such as genocide and crime against humanity. In relation with the Human Rights Court, there have been issued as well Law No. 2 of 2002 concerning Procedure for the Protection of the Witnesses and the Victims of Serious Abuses of Human Rights, and Government Regulation No. 14 of 2003 on Compensation, Restitution, and Rehabilitation to the Victims of the Crimes of Human Rights.

Promotion of human rights has been giving stress on efforts to protect the rights of women, children, labors, disabled and minority people. In this context, the Ministry for Law and Human Rights as the official institution that is concerned with the matter, has been active in maintaining cooperation and coordination with other related bodies such as the Police, the Offices of Immigration and Customs, the Office of Attorney General etc, to promote the public's legal awareness, and respect to human rights. The legal promotion has taken place in various forms from dramas broadcast by radio and television, to displays, etc.

During the period of 2001-2004, the Human Rights Courts, available only in Jakarta, Medan, and Makassar, had adjudicated 24 cases of serious human rights abuses, namely 18 cases in East Timor, four cases in Tanjung Priok incident and two cases in Abepura (Irian Jaya or Papua) incident. Evaluation and assessment of the legal promotional activities have been regularly made. In line with this, it has been officiated villages with high awareness of legal matters in West Sumatra and East Kalimantan.

Eradication of Corruption

Endeavors to establish good and clean governance have been persistently sought out by among other things preventing and eradicating the practices of corruption, collusion and nepotism. In line with this, Law No. 30 of 2002 on Corruption Crimes Eradication Commission has been enacted and put into effect.

Under the Law, the Commission has been in operation, and even investigating six big corruption cases involving government officials. This is to add to Law No. 20 of 2001 on the Eradication of Corruption Crimes that broadens the meaning of corruption crime, and put into force the burden of reverse proof by keeping on abiding the principle of presumption of innocence.

During the period of 2001-2004, the Attorney General handled 1,807 special criminal cases including corruption cases, of which 1,099 cases had been adjudicated.

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It is realized that there are still difficulties for law enforcers to handle cases of corruption, collusion and nepotism as well as abuses of human rights due to primarily the lack of public trust over law enforcers for there are still many cases left unsettled, in addition to lackluster of the intelligence function, putting investigators and attorneys on unfavorable situation to gather sufficient corruption-related proofs.

It must be admitted that the eradication of Corruption, Collusion, and Nepotism, (KKN) has not been executed optimally. To eradicate KKN optimally, the Government has enacted Law No. 30 of 2002 on Corruption Crimes Eradication Commission. Meanwhile, to follow up the law aforementioned, the Ministry of Justice and Human Rights has established the Steering Committee for the Preparation of Appointment of Membership of the Corruption Crimes Eradication Commission.

In line with KKN eradication in the law enforcement field, so far the steps have been taken for the supervision of special cases in relation with cases handling, authority delegation, accountability and transparency, primarily in the Attorney General Office.

The Attorney General had handled 733 cases of corruption crimes in the period of January 2002 to April 2003 in the phase of investigation, 522 cases in the phase of prosecution, 6 cases in the phase of resistance, 318 in the phase of appeal, 502 cases in the phase of appeal to the Supreme Court, and 38 cases in the phase of judicial review.

Application of Copyrights Law

Law No. 19 of 2002 on Copyrights started to take effect as of Tuesday, July 29, 2003. The Ministry of Justice and Human Rights, in coordination with the Indonesian Police, in the short term has made priority to eradicate film and song piracy, which is estimated to have caused the state losses of Rp8 billion every year.

Films and songs have been included as intellectual property. Preferring to the Law on Copyrights, other property works that have also been admitted are computer program, books, speeches and lectures material, visual displays for education and science, songs or music, drama, art works, architecture, batik arts, photography, cinematography, and translation or interpretation.

Law on Anti-Money Laundering

In its Plenary Session on September 16, 2003, the House of Representatives agreed to enact Law No. 16 of 2003 on Eradication of the Crimes of Money Laundering.

Five important articles from the previous law were amended as the efforts to prevent money laundering parties. The amendment of these five articles is important because these will be one requirement for Indonesia to be exempted from the sanctions of Counter Measures from the countries involved in money laundering eradication grouped in the Financial Action Task Force on Money Laundering (FATF). Previously, the FATF determined that the previous law on Money Laundering still contained weaknesses.

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The fight against money laundering action has been boosted since the tragedy of bomb blast at the World Trade Centre (WTC) building in New York on September 11, 2001. The United States and other developed countries believed that the biggest sources for terrorist fund had come from dirty money resulted from narcotics trafficking, corruption, financial fraud, or smuggling. By tightening money laundering action, it is hoped to narrow the terrorism actions.

The five articles of the amendment of Law concerning Money Laundering Crimes are:

— To eliminate the minimum requirement of Rp500 million to be categorized as a crime of money laundering.

— To extend the definition of money suspicious money transaction.

— The period of reporting suspicious transactions has been shorted from 14 work days to three work days.

— To prohibit financial service institutions and authorities not to leak the transaction reports.

— To regulate international cooperation in the form of reciprocal legal on problems of money laundering handling.

The enactment of the bill into law shows Indonesia's commitment to adjust the regulation on prevention and eradication of money laundering crimes to international standard, as well as a realization of Indonesia as a member of the international community to participate in narrowing the action space of crimes and as an effort to prevent and eradicate money laundering.

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ECONOMY

General feature

Entering the year of 2004, the country's macro-economy was enjoying a heartening and significant improvement, following the maintaining of more favorable political and security conditions. Thanks to sound achievements of the country's macro-economy during the year of 2003 the best achievement since the crisis hit the country in the middle of 1997. The performance has become a solid basis for economic development in the future, particularly for the year 2004. More heartening are the implementations of the country's legislative general elections and the direct presidential election in 2004, which ran smoothly without even a single incident. This will certainly promote a sustained economic recovery with more favorable condition. Fairly conducive and stable monetary condition as indicated chiefly by the strengthening of rupiah (the country's currency), a continued easing of inflation environment, and controllable base money, had indeed attributed to moderate economic growth of 4.1 percent in 2003.

In 2002, economic growth was recorded at 3.77 percent. As a matter of fact, inflation in 2003 stood at 5.6 percent (y.o.y), lower than 10 percent in 2002; Bank Indonesia's benchmark interest rate was 8.3 percent (in December 2003), lower than that of 13 percent at the beginning of the year; and international foreign exchange reserve stood at US$36 billion, sufficient for exports during seven months. Still, in the context of anticipating the post IMF program, particularly in pursuing the improvement of investment and exports, the Government formed a National Team for Export and Investment Improvement assigned with three tasks: to formulate general policy for export and investment improvement; to determine measures required to improve export and investment; and to examine and decide settlement for crucial problems when they arise in the process of export and investment improvement.

The better performance of economic indicators in 2003 should certainly become the stable basis for more improvement of economy on 2004, of which its recovery assumptions of the real and macro-economic sectors to be attained have been defined through the 2004 State Budget. Those assumptions are among other things: economy is projected to grow at 4.8 percent; investment at 2.8 percent; agricultural sector at 2.3 percent; and manufacturing sector at 3.5 percent.

Rupiah exchange rate was stable with strengthening trend. Export value reached US$61.02 billion or US$5 billion in average per month, meaning it was returning to the level reached before the monetary crisis in 1997. Non-oil and gas export value showed an increase of 5.18 percent compared to that of 2002. More hearteningly, an international ratings agency, Moody's, has upgraded the country's sovereign rating from CCC-to B+, boosting foreign trust to invest in Indonesia.

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In line with the improved macro-economy, the year 2003 also saw the dissolution of the National Bank Restructuring Agency (BPPN) and the termination of the IMF's Extended Fund Facility. The Government then issued an economic policy package called the "White Paper" (Presidential Instruction No. 5 of 2003) on September 2003 with its principal targets: to build on the macro-economic progress; to further strengthen the financial sector; and to improve the climate of investment, exports and job opportunities. Meanwhile, inflation rate is projected to stand at 6.5 percent; Rupiah exchange rate against one U.S. dollar at Rp 8.500; Bank Indonesia's three month-notes (SBI) at 8.5 percent in average; oil price per barrel at US$22; and crude oil production per day at 1.15 million barrels. In addition, the government debts to gross domestic product (GDP) ratio is expected to be 60.3 percent, much better than that of 2003 which was 66.4 percent. The country's foreign exchange reserve is projected to reach US$34.4 billion, lower than that of 2003, which stood at US$36 billion. The decrease is chiefly due to the payment of principal and interest of foreign debt.

Economic Prospects

The 2004 General Elections i.e. general elections to elect members of legislative bodies and the direct Presidential Election, would truly encourage the increase of expense and demand for goods and services in bulk. Further, the post 2004 general elections is expected to give contributing achievements as follows: improvement of economic growth; enhancement of quality of economic growth as the result of political and public accountability improvement; better economic stability as the national result of better representation system in national, provincial and district/municipal legislative bodies.

In the context of achieving the matters mentioned above, the Government has determined economic priority programs for the year 2004, namely: to maintain continuous economic recovery and reform in the first year after the termination of the IMF's Extended Fund Facility to nurture external and internal credibility; to execute strategy of growth based on competitive edge improvement through investment and exports; to boost more growth of the 2004 Gross Domestic Product for the sake of the people's welfare improvement in the whole; to continue the strive for poverty eradication and creation of job opportunities through human resource quality improvement towards Millennium Development Goals, and better economic development which takes social-welfare into account; to secure the implementation of the 2004 general elections from the economic point of view, by maintaining economic activities in order that market of goods and services, capital market and labor market run normally, and to maintain sufficient supply and distribution of basic materials throughout the country; to anticipate the possibility of accelerating the 2005 State Budget drafting in connection with the implementation of the 2004 general elections; and to encourage the application of good corporate governance.

Economic Growth (GDP)

Despite SARS endemic and terrorist attacks, the Bali bombings and the Marriott Hotel bombing, impeding the country, the economy in 2003 proved tough enough to grow moderately at 4.1 percent, higher than that of 2002 by 3.7 percent and even higher than

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global economic growth, which was estimated at 3.2 percent. Economic growth without oil-and-gas was recorded at 4.6 percent. The value of GDP at 2000 constant prices in 2003 was estimated to reach Rp444.5 trillion, and without oil-and-gas was Rp412.7 trillion. Viewed from economic industrial sectors' contribution to GDP in 2003, some 24.65 percent originated from manufacture, 16.58 percent from agriculture, 16.32 percent from trade, 10.70 percent from mining, 10.39 percent from services, 6.88 percent from finance, 6.25 percent from transport and communications, 6.00 percent from construction, and 2.22 percent from utility.

Economic growth for the first quarter of 2004 was estimated to hover between 4.3 percent and 4.7 percent. The estimated growth was expected to be underpinned by higher fair growth of exports and consumption. Consumption was expected to grow by between 4.2 percent and 5 percent, and export between 2.5 percent and 3.5 percent.

By sactorial fronts, the biggest contribution to GDP in 2004 is still expected coming from the sectors of manufacture and agriculture. Manufacture, which is predicted to grow at only 3.5 percent, is expected to contribute almost a quarter of GDP. Agriculture is expected to contribute some 16 percent, though predicted to grow by 2.5 percent.

Except mining, other sectors such as electricity, gas and drinking water, construction, trade, hotel and restaurant as well as transport are expected to post an increasing contribution.

The country's GDP at current prices in March 2003 was recorded at Rp 451,530.29 billion, and in March 2004 at Rp 551,164.6 billion, meaning an increase of 24.6 percent. Non-oil and gas GDP in March 2004 grew at about 24.49 percent, to reach Rp 506,265.8 billion compared to that of March 2003. While oil and gas GDP in March 2004 decreased by 12.36 percent compared to that of March 2003, namely from Rp 51,777.4 billion in March 2003 going down to Rp 45,376.8 billion in March 2004.

Income per Capita

Parallel with the improved economic situation as macro-economic indicators showed, the GDP per capita for Indonesians notes an increasing tendency, though has not yet reached the level before the monetary crisis in 1997.

In 2003 per capita income at current prices grew to 7.1 million rupiahs or about US$968, from 6.6 million rupiahs in 2002. Based on 2000 constant prices, per capita income in 2003 noted an increase of 2.85 percent and 1.58 percent in 2002.

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Jakarta International Container Terminal that plays an important role in importing-exporting activities

Exports

Exports continue to show a heartening development, particularly those of non-oil and gas. Export value in 2003 reached US$61.023 billion or an increase by 6.76 percent compared to that of 2002. The value of non-oil and gas exports in 2003 grew by 5.18 percent surpassing the targeted 5 percent to reach US$47.380 billion. That of oil and gas increased by 12.63 percent to reach US$13.642 billion.

Dominating exports of non-oil and gas in 2003 were machinery and electric tools. They accounted for 13.08 percent. Trailing behind was mechanical engines that accounted for 6.18 percent, animal and vegetable oil for 6.05 percent.

Main export destinations of the country's exported commodities in 2003 were the US that accounted for some 15 percent, Japan for 14 percent, and Singapore for 9.93 percent.

When entering the year 2004, exports continued to indicate an increasing trend: In January 2004, export value reached US$5.03 billion, compared to that of January 2003, which stood at US$4.99 billion. In April 2004, export value was recorded at US$5.21 billion, increasing

by 2.68 percent compared to that of March 2004, which reached US$5.07 billion.

The increase of exports in April 2004 was attributed to the growth of non-oil and gas exports by 3.94 percent from those of March 2004. Export value in May 2004 even reached US$5.5 billion or an increase of 5.6 percent. Attributable to the increase was the

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high augment of non-oil and gas exports to China, Japan and South Korea. Thus, cumulative exports during the period of January-May 2004 reached US$25.71 billion, meaning an increase of 2.21 percent compared to that of the corresponding period in 2003.

In May 2004 the country's foreign trade surplus was recorded at US$2.28 billion, compared to US$1.75 billion in April 2004.

Imports

The country's import value in whole in 2003 was US$32.39 billion, or increasing by some 3.52 percent. In January 2004, import value grew a bit by 0.24 percent, making the total amount of imports during the said month US$2.76 billion. In March 2004, non-oil and gas imports reached US$2.18 billion before augmenting by 5 percent to reach US$2.29 billion in April 2004. During the period of January-April 2004, import value rose by 10.20 percent compared to that of the corresponding period last year, namely from US$10.99 billion to US$12.12 billion. The increase was attributed to imports of oil and gas as much as 35.16 percent, and 3.05 percent of non-oil and gas imports.

Imported commodities comprised machines, organic chemical, electric machines and equipments. Indonesia imported those commodities mainly from Japan, the US and China.

In May 2004, import value amounted to US$3.22 billion, decreasing by 6.81 percent compared to that of April 2004. Cumulatively the country's import value reached US$16.88 billion or an increase by some 24.38 percent compared to that of the corresponding period in 2003, which amounted to US$13.57 billion.

Balance of Payment

Balance of payment in the past few years marked positive development. Underpinned by increasing tendency of exports, the country's balance of payment in 2003 recorded a surplus of US$4.2 billion, up from US$4.0 billion in 2002.

In the meantime, the country's international foreign exchange reserves at the end of 2003 stood at US$36.3 billion, swelling from US$32.0 billion in 2002. In the second week of August 2004, international reserves were recorded at US$34.97 billion.

Monetary

Monetary policies remain to be focused on striving to maintain monetary stability. This is aimed at securing the target of the middle-run inflation by keeping on reinforcing the process of economic recovery through the promotion of economic growth. In line with this, interest rate is still made possible to be lowered prudently and consistently by the achievement of such inflation target. On another side, necessary interventions in foreign exchange would be done to control excessive volatility of rupiah exchange rate. This

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would be parallel with the implementation of foreign exchange transactions monitoring and control against prime doers in markets.

In general, monetary condition during the first quarter of the year 2004 was quite stable, portraying this was expanded stable and controlled monetary, underpinned by more favorable domestic economic fundamental factors and controllable inflation expectation.

Inflation

The year-on-year inflation rate in the year 2003 was recorded at 5.1 percent, far lower than that of 2002 at 10.48 percent.

For the year 2004, inflation rate is expected to be 6.5 percent, and for the year 2005 and 2006 is projected to be 5.5 percent each.

During the first quarter of the year 2004, inflation noted a downward trend, namely 5.11 percent (y.o.y) due to the decrease of inflation rate in foodstuff components, lower impact of administered prices, and relatively stable of rupiah exchange rate.

In July 2004, inflation recorded a 15-month high of 7.2 percent higher than annual rate target of 6.5 percent. The rise was mainly due to increasing prices of foods and other basic commodities.

Interest Rate

The benchmark interest rates of Bank Indonesia (Central Bank) promissory notes (SBI) have been enjoying a downward trend.

At the end of the year 2003, the 3-month SBI stood at 8.34 percent, down from 13 percent at the beginning of the year 2003, and lower than the target of 10.1 percent.

For the year 2004, the benchmark interest rate of 3-month SBI is projected at 8.5 percent on average. In April 2004, it was recorded at 7.25 percent.

Following this trend have been credit interest rates, particularly deposit interest rate. In the first quarter of 2004 the 1-month deposit interest rate was 5.99 percent, and 3-month deposit interest rate 6.98 percent.

Rupiah Exchange Rate

On average, rupiah exchange rate during the first quarter of the year 2004 was relatively stable compared to that of the fourth quarter of the year 2003, recorded at Rp8.469 per US$. The figure is close enough to the previous estimate of Rp8,300 to Rp8,500 per US$ on average. Attributable to the relatively stable rupiah exchange rate were more favorable domestic economic fundamental factors that promote domestic foreign exchange supply, positive market expectations towards rupiah value movement, increasing investors'

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confidence on account of up-grade sovereign rating by Moody's international rating agency, as well as greater socio-political stability.

Rupiah exchange rate in April 2004 was recorded at Rp8,691 per US$, or declining by 1.48 percent against that of March 2004. This declining trend was attributed chiefly to the strengthening of US$ against other world's currencies following the improvement of the US's macro-economic indicators.

Base Money and Economic Liquidity

Base money in April 2004 stood at Rp146.34 trillion. Meanwhile, the total amount of M2 (M1 plus quasi money) reached Rp935.2 trillion, shrinking from Rp935.7 trillion in March 2004. The declining trend of M2 was largely due to lowering demand deposit following the decrease of deposit rate.

At the same time, the position of M1 (currency and demand deposit) changed insignificantly, reaching Rp219.0 trillion.

The relatively unchanged growth of M1 and M2 would hopefully give room to the improvement of public purchasing power and consumption.

Current State Budget

As of 2002 the Government has been practicing a deficit budget system, replacing the two-decade standing balanced budget policy. The budget deficit has been consequently financed from both internal and external sources. In addition, starting in 2005, as mandated by Law No. 17/2003 on State Finance, the state budget will adopt a new budgetary system called an integrated or united system, which merges routine and development expenditures into single expenditure format.

The 2002 budget deficit was recorded at 2.5 percent of the country's GDP, and in 2003 it stood at 1.9 percent, slightly higher then the expectation of 1.8 percent. For 2004, it is projected to be 1.2 percent and 0.6 percent of GDP in 2005.

The 2004 State Budget features a continuation of the government's endeavors to attain its three major economic policy objectives: (1) achieving favorable fiscal condition and reducing government debt; (2) maintaining sustainable medium-term fiscal policy; and (3) providing a modest degree of stimulus to the overall economy, within the constraints set by the government's fiscal year policies.

The 2004 State Budget earmarked government revenue and grants of Rp349.9 trillion or some 17.5 percent of GDP, and government expenditures of Rp374.4 trillion or some 18.7 percent of GDP. For comparison, budget allocation for government revenue and grants in 2003 totaled Rp341.1 trillion or 17.3 percent of GDP, and expenditures totaled Rp 374.8 trillion or 19.1 percent of GDP. It means government expenditures in 2004 are

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budgeted to shrink to 18.7 percent of GDP from 21.3 percent in 2003; and development spending are budgeted to decline to 3.5 percent from 3.7 percent in 2003.

The largest shares of the development budget are allotted to education, transportation, health, social assistance and programs aimed at poverty alleviation.

Of the total government revenues in 2004, tax revenues are projected to reach Rp272.175 trillion or some 13.6 percent of GDP; and non-tax revenues to reach Rp77.124 trillion or some 3.9 percent of GDP.

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STATE BUDGET 2004 & PROPOSED BUDGET 2005

(In billions rupiah)

2004 2005

Items Budget % Proposed %

to GDP Budget to GDP

A. Total Revenue and Grants 349,933.7 17.5 377,886.3 17.2

I. Domestic Revenue 349,299.5 17.5 377,136.3 17.2

1. Tax revenue 272,175.1 13.6 297.510.0 13.6

a. Domestic Taxes 260,223.9 13.0 285,147.3 13.0

i. Income tax 133,967.6 6.7 141,858.5 6.5

1. Oil and Gas 13,132.6 0.7 13,568.6 0.6

2. Non oil & Gas 120,835.0 6.0 128,289.4 5.9

ii. Value-added tax 86,272.7 4.3 98,828.4 4.5

iii. Land and building tax 8,030.7 0.4 10,272.2 0.5

iv. Duties on land and building transfer 2,667.9 0.1 3,214.7 0.1

v. Excises 27,671.0 1.4 28,933.6 1.3 vi. Other taxes 1,614.0 0.1 2,039.9 0.1

b. International trade tax 11,951.2 0.6 12,367.2 0.6

i. Import duties 11,636.0 0.6 12,017.9 0.5

ii. Export tax 315.2 0.0 344.8 0.0

2. Non-tax Revenue 77,124.4 3.9 79,626.3 3.6

a. Natural Resources 47,240.6 2.4 50,941.4 2.3

i. Oil and Gas 44,002.2 2.2 47,121.1 2.2

ii. Non Oil and Gas 3,238.3 0.2 3,820.3 0.2

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b. Profit transfer from SOE's 11,454.2 0.6 9,420.0 0.4

c. Other non-tax revenues 18,429.8 0.9 19,260.9 0.9

II. Grants 634.2 0.0 750.0 0.0

B. Expenditures 374,351.3 18.7 394,778.5 18.0

I. Central Government Expenditures 255,309.1 12.8 264,877.3 12.1

1. Personnel expenditures 57,235.2 2.9 62,238.1 2.8

2. Material expenditures 35,639.9 1.8 30,971.8 1.4

3. Capital Expenses 39,775.1 2.0 42,970.0 2.0

4. Interest Payments 65,651.0 3.3 63,986.8 2.9

a. Domestic interest 41,275.9 2.1 38,844.5 1.8

b. External interest 24,375.1 1.2 25.142.4 1.1

5. Subsidies 26.638.1 1.3 33,645.2 1.5

a. SOE's 26,589.5 1.3 33,603.0 1.5

i. Financial Institutions 853.4 0.0 1.153.0 0.1

ii. Non Financial Institutions 25,736.1 1.3 32,450.0 1.5

b. Private entreprises 48.6 0.0 42.2 0.0

6. Grants

7. Social Assistance 14,293.3 0.7 16,268.6 0.7

8. Others 16,078.5 0.8 14,796.8 0.7

II. Regional Transfer 119,042.3 6.0 129,901.2 5.9

1. Balanced Funds 112,186.9 5.6 123,448.2 5.6

a. Revenue Sharing 26,927.8 1.3 31,217.8 1.4

b. General Allocation Fund 82,130.9 4.1 88,130.4 4.0

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c. Special Allocation Fund 3,128.1 0.2 4,100.0 0.2

2. Special Autonomy & Adjustment Fund 6,885.4 0.3 6,453.0 0.3

a. Special Autonomy Fund 1,642.6 0.1 1,762.6 0.1

b. Adjustment Fund 5,212.8 0.3 4,690.4 0.2

C. Primary Balance 41,233.4 2.1 47,094.7 2.1

D. Overall Balance (A-B) (24,417.6) (1.2) (16,892.2) (0.8)

E. Financing 24,417.6 1.2 16,892.2 0.8

I. Domestic Financing 40,556.3 2.0 37,085.8 1.7

1. Domestic Bank Financing 19,198.6 1.0 9,000.0 0.4

2. Domestic Non-Bank Financing 21,357.7 1.1 28,085.8 1.3

a. Privatization Proceeds & Assets Recovery 10,000.0 0.5 7,500.0 0.3

b. Government bonds (net) 11,357.7 0.6 20,585.8 0.9

II. Foreign Financing (16,138.7) (0.8) (20,193.6) (0.9)

1. Gross Drawing 28,237.0 1.4 26,642.9 1.2

a. Program Loan 8,500.0 0.4 8,600.0 0.4

b. Project Loan 19,737.0 1.0 18,042.9 0.8

2. Amortization (44,375.7) (2.2) (46,836.5) (2.1)

Pursuant to Law No. 22 of 1999, a significant proportion of central government revenue goes to provincial and local governments. Revenues apportioned for provincial and local governments are derived from taxes and natural resource revenues. The 2004 budget allocates some 31.8 percent of central government expenditures for provincial and local governments, compared to some 32.2 percent in 2003.

The Proposed 2005 State Budget

The proposed 2005 State Budget portrays key assumptions used to estimate expenditures and revenues are quite conservative. It estimates a GDP growth of 5.4 percent, an average rupiah exchange rate of Rp 8,600 to one US dollar, interest rate at 6.5 percent, inflation

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5.5 percent, and average international oil price at US$24 a barrel. It also predicts a budget deficit of 0.8 percent, down from 1.2 percent at current year.

The budget envisages higher government's expenditures of Rp 264 trillion than that of previous year, which amounted to Rp255.3 trillion. Those which would receive larger proportion are ministries of defense, education, settlement and infrastructure, health, and the National Police. Of the proposed total government expenditures, some Rp 22 trillion would go to the Defense Ministry, Rp 21.5 trillion to the Ministry of Education, Rp12.4 trillion to the Ministry of Settlements and Infrastructures, Rp11.2 trillion to the National police, and some Rp 7.4 trillion to the Ministry of Health.

The budget also envisages tax revenues of Rp297.5 trillion (US$32.11 billion), higher than the 2004 tax revenues target of Rp 260 trillion.

Taxation

As of 2001 the share of tax receipts to government revenues has been noting an increasing trend. In 2001, tax revenues accounted for some 61.6 percent of the total government revenues. The figure then grew to some 70.0 percent in 2002 and 75.6 percent in 2003.

In 2003, realized tax revenues were 97.2 percent of the year's target; domestic tax revenues were 97.3 percent; and international tax revenues 98.8 percent of the target.

In the context of augmenting the share of tax revenues to the government revenues in 2004, endeavors have been focused on tax and custom administration reform. The reform includes improved utilization of modern technology, regulatory reform, institutional developments, and improvement of quality of human resources. Parallel with this, the scheme to minimize arrears has been more intensified due to increasing tendency of evading. In 2001, for example, tax arrears amounted to Rp13.3 trillion, and swelled to Rp17.3 trillion in 2002, before decreasing slightly to Rp17.1 trillion in 2003.

For 2004, tax revenues are projected to amount to Rp272, 2 trillion or growing by 7.1 percent from that of 2003. Of the total tax revenues, some 49.2 percent derives from income tax and some 31.7 percent from value-added tax as well as tax on luxurious goods.

By value, realized tax revenues during the first quarter of 2004 amounted to Rp 51.5 trillion or an increase of 15 percent compared to that of the corresponding period in 2003.

Tax ratio in 2003 stood at 13.1 percent of GDP, and for 2004 it is projected to reach 13.6 percent, a slight increase from the target of 13.5 percent, but still below those of neighboring countries, which ranges between 14 percent and 15 percent.

In helping to improve and boost domestic businesses in order that they enable their outputs to meet both local and overseas demands, the 10-percent value-added tax on the

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import of certain capital goods and raw materials by several industries has been waived, and the luxury tax on 45 products eliminated.

Foreign Debt

It has been a key policy of the Government since 1997, when financial crisis hit the country as well as other Asian countries, to reduce public debt in percentage of GDP. So far, the fruit of the policy has been tangible: Its external debts as a percentage of GDP shrank from a peak of 65.3 percent in 1998 to 49.5 percent in 2000, further to 47.5 percent in 2001, to 43.1 percent in 2002, and to 39.1 percent of GDP in 2003.

The country's total debt repayment is expected to reach US$21.01 billion in 2004, down from the estimated US$28.31 billion in 2003. Of the total debt repayment, around US$16.24 billion would be for the payment of principal, and the remaining US$4.77 billion would be the interest.

Up to March 2004, the country's outstanding foreign debt amounted to US$136.10 billion, up from US$134.40 billion during the previous month. Attributable to the increase was the raise in official foreign debts of US$81.197 billion from US$80.01 billion previously.

On the contrary, the outstanding private debts slightly shrank from US$52.77 billion in February 2004 to US$52.39 billion in March 2004. The decrease was chiefly due to the lower outstanding private debt of non-financial institutions, whereas the bank and non-bank private debt augmented.

Banking

Policies in the banking industry are more focused on various measures to reinforcing the condition of the national banking industry. This is a continuation of banking restructurization programs in the context of making the banking industry recover. The measures put a stress on sustained efforts to recover its intermediary role. They are also aimed at improving the banking system through among other things enhancement of banking good corporate governance, and improvement of banking regulations and control. This includes the betterment of banking services innovations such as mobile banking services via the growing popular cellular phones.

In line with more favorable monetary condition, some indicators in the banking industry have shown heartening improvements. Banking intermediary function has slightly improved further as the growing third party funds and higher credit position reflect, so this needs to be optimized. Other banking indicators such as net interest margin (NIM) has been persistently growing; non-performing loans (NPLs) relatively low;

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BNI branch office in Medan, North Sumatra

banks' capital and profit ratio relatively stable; and capital adequacy ratio (CAR) improving.

At the first quarter of 2004 (March 2004), banks' total assets amounted to Rp1,150.0 trillion. Meanwhile, third party funds shrank by Rp11.5 trillion to reach Rp877.1 trillion. At the same time, credit position stood at Rp477.30 trillion. New credit during the first quarter of 2004 was amounting to Rp4.3 trillion, some 53.9 of which went to small-and-medium establishments (SMEs). By type of usage, the new credits had been channeled for working capitals (45.6 percent), investment (24.3 percent) and for consumption (30.1 percent). Loan-to-deposit ratio in March was recorded at 43.7 percent, growing from 42.9 percent in the previous month.

Reflecting improved banking performance had been net interest income that grew from Rp3.2 trillion in the third quarter of 2003 to Rp5.1 trillion in the first quarter of 2004. The increase was mainly due to the increase of credits and the declining tendency of credit interest.

In general, banks' capital adequacy ratio (CAR) in the first quarter of 2004 was well above the minimum level, namely around 23.2 percent, up from 19.4 percent in the previous quarter. During the year 2003 the average CAR level was around 23 percent, higher than that of 2002 at 21 percent. The central bank's minimum requirement was set at eight (8) percent.

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Until June 2002, the number of bank offices was recorded at 14,300. The country's major banks are Bank Mandiri, which in March 2004 had a total asset of Rp239,383 billion; Bank Central Asia (BCA) which had a total asset of Rp 136,139 billion; Bank Negara Indonesia (BNI) Rp125,078 billion, Bank Rakyat Indonesia (BRI) with its total asset of Rp 94,503 billion, Bank Danamon with total asset of 54,887 billion, Bank International Indonesia (BII) with its total asset of Rp29,769 billion, Lippo Bank Rp 26,090 billion, Bank Tabungan Negara (BTN) Rp 25,623 billion, Bank Niaga Rp 23,393 billion, and Citibank with total asset of Rp 23,012 billion.

In addition, there are also several overseas banks' representative offices operating in the country's major cities. Those banks include Bank of America, Bank of Tokyo, Hong Kong Bank, Amro Bank, Standard Chartered Bank, Thai Bank, etc.

Bank Indonesia

Previously, Bank Indonesia, the country's central bank, was regulated under Law No. 11 of 1953. However, since the issuance of Law No. 23 of 1999, which has been amended by Law No. 23 of 2004 on Bank Indonesia, the bank operates under the Law that allows it the status and position as an independent state institution, free from any interference by the Government and other external parties. It means that the bank is fully autonomous in formulating and executing each of its task and authority as the Law regulates.

As it is governed, the Bank Indonesia has one single objective: to achieve and maintain stability of Rupiah, the country's currency. To pursue the objective the bank has the task: to formulate and implement monetary policy; regulate and ensure a sound payment system; and regulate and supervise the national banking system.

The Bank's accountability and transparency take the form of open information pertaining the evaluation of monetary policies having been executed in the previous year, and policies being planned for next year as well as their targets for the public. Such information is also reported to the President and the House of Representatives (DPR).

In relation with the Government, the bank assists the printing and placement of government securities to finance the State Budget; acts as the cashier to the government and administrator of government account at the Bank Indonesia, and accepts, upon request by the Government, foreign loans for and on behalf of the government.

State-owned Enterprises

The meaning of a state-owned enterprise (BUMN) in general term is a corporate body outside of the Bank Indonesia, with no-less-than-51 percent share of which must be owned by the government, and a joint-venture in which all shares are owned by the government together with local governments or other state-owned enterprises without taking the composition of the government ownership into account.

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The Office of the Minister of State-owned Enterprises supervises state-owned enterprises, numbering 160 establishments in 2003. Privatization schemes are still underway to broaden public ownership, improve their efficiency and productivity, and revive finance and management in order to augment their outputs and products' competitive edge. Those 160 establishments do businesses in the sectors of manufacturing, trade, construction services and consultancy, transport, communications, tourism industry, financial services, agriculture, plantations and forestry as well as public services.

They are grouped into large, medium, and small undertakings. So far, there are four large state-owned enterprises which possess assets worth over Rp 50 trillion, six enterprises with assets worth from Rp10 trillion to Rp 50 trillion; while medium enterprises own assets worth ranging from Rp5 trillion to Rp10 trillion. Among the large enterprises are PT. Telkom Indonesia Tbk, Bank Rakyat Indonesia, Bank Mandiri, Bank BNI, PT. Pupuk Kujang, PT Aneka Tambang Tbk, PT. Petrokimia Gresik.

In 2001, the total assets of those state-owned enterprises were estimated to reach Rp849.19 trillion, and their whole capitals amounted to Rp249.2 trillion. Their net profits in 2000 were Rp13.3 trillion and in 2001 were estimated at Rp26.9 trillion. In 2003, those state enterprises were estimated to gain profit of Rp28 trillion. Meanwhile, up to March 2004, gains of BUMN privatization schemes having been deposited to the state treasury amounted to Rp3.2 trillion out of the targeted Rp5 trillion. Realization of such privatization schemes in 2002 and 2003 was Rp7.7 trillion and Rp7.3 trillion respectively.

Insurance

Non-bank financial institutions continuously show an improved performance, particularly insurance. During the year 2002 and 2003, the number of insurance enterprises remained 73 establishments, consisting of 60 life insurance companies, 140 loss insurance companies, four reinsurance companies, two social insurance and worker social insurance companies and three companies running insurance programs for civil-servants and military personnel. In addition, there were 120 insurance brokers, 20 reinsurance brokers, 25 insurance adjusters, and 21 insurance consultants.

For the past five years, total assets of insurance companies have augmented meaningfully. The total assets of life insurance companies in September 2003 were recorded at Rp 31,320.5 billion, up from Rp 26,320.5 billion in 2002. On the contrary, total assets of reinsurance companies shrank slightly from Rp15,768.2 billion in 2002 to Rp15,500.5 billion in 2003. However, total assets of companies running insurance programs for civil servants and military personnel swelled from Rp10,397.1 billion in 2002 to Rp13,323.4 billion in 2003.

Investment gains in the field of insurance have also noted an improved performance. Investment from insurance companies amounted to Rp 412.4 billion in 2002, before growing to Rp 442.8 billion in 2003. Insurances' total investment value in September 2003 amounted to Rp 442.8 billion, increasing 7.39 percent from that of 2002.

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Investment

Domestic investment is regulated under Law No. 6 of 1968 which has been amended by Law No. 12 of 1970, while direct foreign investment is regulated under Law No. 1 of 1967, as amended by Law No. 11 of 1970.

A government institution that manages investment in Indonesia is the Investment Coordinating Agency (BKPM), established in 1973. This agency, directly accountable to the President, is tasked mainly to: formulate and assess national investment policies; coordinate and perform investment promotion; and coordinate investment development activities among government institutions.

In provincial level, there is a Provincial Investment Agency, headed by a chairman of the agency who is accountable to local governor. In giving approvals to direct foreign investment applications, the country's representative offices such as embassies, consulate-generals and consulates abroad, are authorized to do that.

Investment trend

Up to 1997 when monetary crisis hit the Asian countries, Indonesia had been one of most attractive investment destinations in the Southeast Asian region. Attributable to this was that the country introduced liberal investment policies and regulatory frameworks, and offered foreign investors good incentives and favorable investment climate. Unfortunately, the prolonged economic crisis since the middle of 1997, widespread security problems, and frequent disputes among labor associations and employers have to some extent withered away foreign investors' interest to invest, and they turn away looking for other promising countries.

In anticipation of such unfavorable situation, the Government has introduced various efforts, ranging from the issuance of measures as required by "the White Paper", to promotional activities such as road-shows to overseas in the context of improving investment to speed up economic recovery and widen job opportunities. Included in those measures have been plan to open more sectors for foreigners' ownership, and step to centralize the authority to license foreign and domestic investment in the Investment Coordinating Board (BKPM) aimed at relevant ministerial offices and regional administrations as well as making it easier for investors to get business permits.

Domestic Investment Performance

Approvals on domestic investment during the period of January-June 2004 or the first semester of 2004 were 72 projects with investment value of Rp15,773.7 billion. In addition, there were 45 expanded projects with investment value of Rp3,867.3 billion. In term of number, approved projects during the January-June 2004 noted a substantial decrease compared to those of the corresponding period in 2003, but in term of investment value recorded the contrary. Approved projects in the January-June of 2003 numbered 109 projects, with investment value of Rp10, 357.5 billion.

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At the same time, the most attractive business sector for domestic investment was food-processing industry (14 projects). Trailing behind were transport, warehouse and telecommunications (8 projects), machine and electronic industry (7 projects), and rubber and plastic industry (5 projects).

By term of investment value, the electric, gas and drinking water sector ranked first by absorbing Rp4,994.3 billion; foodstuffs industry came second with Rp4,591.0 billion, and transport, warehouse and telecommunications third with Rp1,038.4 billion. By location, the Province of Central Java ranked first, followed by Riau, the Special Territory of Jakarta, the Province of West Java, and the Province of Banten.

Direct Foreign Investment

There were 551 approved projects of direct foreign investment worth US$3,049.2 million during the period of January-June 2004. In addition, there were also 118 expanded foreign investment projects with investment value of US$1,046.8 million.

Compared to that of the corresponding period of 2003, direct foreign investment in term of value, in the period of January-June 2004 suffered a decrease, but in term of project number was increasing. The total investment value during the period of January-June 2003 was US$ 4,649.7 million to finance 510 projects.

The most attractive sector for direct foreign investment during the period of January-June 2004 was metal, machinery and electronic industrial group that absorbed as much as US$729.8 million; followed by hotel and restaurant with US$536.4 million, textile industry with US$321.3 million, construction with US$312.2 million, and transport, warehouse and telecommunications with US$282.4 million.

By location, most investment, namely US$760.3 million, with 85 projects, went to West Java Province; followed by the Special Territory of Jakarta that absorbed US$590.1 million with 273 projects, Central Java that did US$315 million with three projects, the province of Banten US$271.9 million with 45 projects, and the province of Lampung US$256.6 million with two projects.

By country of origin, Japan ranked first with US$882.4 million for 30 projects, the UK with US$793.4 million for 42 projects, Malaysia with US$321.3 million for 44 projects, South Korea with US$230.1 million for 107 projects, and Singapore with US$131.8 million for 74 projects.

Cumulatively, there had been 1,597 projects, worth Rp114,831.1 billion, of domestic investment given permanent business permits from 1997 to June 2004. At the same time, the cumulative number of direct foreign investment having received permanent business permits had been 8,626 projects with investment value amounting to US$114,890.1 million.

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CAPITAL MARKET

The Indonesian capital market during the year of 2003 posted a strong performance. Improvements to several macroeconomic indicators-economic growth, inflation and rupiah exchange rate were supported by a stable political situation.

It successfully restored confidence toward the Indonesian capital market and enhanced improvement in trading activities on the Indonesian stock exchanges-the Jakarta Stock Exchange (JSX) and the Surabaya Stock Exchange (SSX) in East Java.

As a result, the composite share price index (CPI) during the year reached a higher level. On the JSX, the highest CPI was noted at 818.159 points on April 27, 2004. This was the highest level of the index since the revival of the Indonesian capital market.

In the first-five month, from January to May 2004, the index declined solely. It was 752.93 points in January, 761.08 points in February, 735.67 points in March, 783.41 points in April and 732.51 points in May.

In 2003, the highest index was 693.033 points toward the end of the year and closed at 691.895 points on its closing level in 2003, or an increase by 63.08% compared to 2002.

Compared to the development of composite index of other countries in the Southeast Asian Countries (ASEAN), Indonesian index development ranked second after Thailand, which recorded an increase by 109.50 pct.

The table below shows the index development in the ASEAN countries:

Countries Dec. 2002 Dec. 2003 %

Thailand 356.48 746.81 109.50

Indonesia 424.945 693.033 63.08

Philippines 1018.41 1450.70 42.45

Hong Kong 9321.29 12464.29 33.72

Taiwan 4452.45 5804.89 30.38

Singapore 1341.07 1741.01 29.82

Dow Jones 8341.63 10450.00 25.28

Japan 8578.95 10500.62 22.40

Malaysia 646.32 787.80 21.89

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The composite price index development on the JSX was noted at 676.91 points in 1999, at 416.32 points in 2000, at 392.03 points in 2001, at 424.94 points in 2002, and at 691.90 points in 2003.

The significant increase of index marked an awakening of the securities industries in Indonesia. This was a reward of hard work by capital market elements to fight for coping with the crises which had hit the country for several years.

Meanwhile, the Surabaya Stock Exchange (SSX) had posted a slow development. It was seen from the composite price index, which was at 566.57 points in 1999, at 267.63 points in 2000, at 220.89 points in 2001, and at 252.51 points in 2003.

In the first five months of 2004, it was noted at 410.81 points in January, 414.85 points in February, 399.61 points in March, 432.81 points in April and 402.24 points in May. The SSX was mostly known as the second class market as it specialized in bond trading activities.

Issuers

Up to May 2004, there had been 488 companies issuing stocks and bond while the total fund mobilization was Rp320,821 trillion. Some 410 companies had launched initial public offering (IPO) and listed their shares on the stock exchanges. Six companies were unlisted as they did not carry out IPO.

Meanwhile, 137 companies issued bond, consisting of 127 launched IPO, 2 Syari'ah Bond (Islamic Concept), 7 Convertible Bond (CB) and 1 Credit Securities (CS). In addition, two bonds wits the US dollar denomination had also been available in the Indonesian bourses worth US$ 105 million.

In March 2003, the Indonesian Capital Market Supervisory Agency (Bapepam) promoted new launch of Syari'ah Capital Market by signing a memorandum of understanding with concerned institutions.

Market capitalization

Till the end of December 2003, market capitalization on the JSX, the main stock exchange, was noted at Rp462.578 trillion, or an increase by 72.33% compared to Rp268.4223 trillion in 2002.

Meanwhile the value of transaction totaled Rp124.55 trillion, or an increase by 3.13% compared to that in 2002 which was only Rp120.765 trillion. Daily transactions lose by 3.84% from 492.91 billion in 2002 to Rp516.79 billion in 2003.

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During 2003, nine companies launched IPO. This figure decreased by 60.87%, while the value of fund mobilization was up 525.0% in 2003, from Rp 1.2 trillion to Rp7.5 trillion in 2003.

In addition, 11 companies launched rights issue with a value of Rp2.5 trillion, a decrease by 70% compared to 2002 with a value of Rp8.6 trillion.

The Indonesian Capital Market Supervisory Agency (Bapepam), a government institution authority, announced that in 2003 there were 54 bonds issued with the total value of Rp 25.2 trillion, or an increase by 306.45% compared to 2002 which was only Rp6.2 trillion.

By that way, all bonds issued in the capital market had reached 254 corporations and 133 companies with a value of Rp62.99 trillion.

In line with the development of securities industry in Indonesia, the Bapepam during 2003 issued 4 licenses to new four securities companies, making a total of 191 companies.

Mutual Funds

In terms of mutual funds as a market instrument of the bourses, its number had also increased to 182 companies in 2003, up by 38.93% compared to only 131 companies in 2002.

Net Asset Capital (NAB) rose by 56.25% from Rp46.61 trillion in 2002 to Rp 72.83 trillion in 2003. As such, the unit holders also made a significant reward in number, from 125.820 in 2002 to 174.892 in 2003.

Market instruments on the Indonesian stock exchanges consist of 336 stocks, 137 bonds, convertible bonds, 7 warrants, margin, rights, and 199 mutual funds. They are traded in regular market, cash market, non-regular market, negotiated market, crossing and others through main and development boards mechanisms.

Investment Management activities showed an increase by 47.05% as its number increased from 13 in 2003 to become 98 companies. Fund mobilization from third party was worth Rp56.9 trillion in 2002 to Rp82.48 trillion in 2003.

To complete the run of the capital market, in 2003 the Bapepam recruited 206 professionals, consisting of 7 appraisals, 96 civil law notaries, 20 legal consultant & offices, 45 legal advisors, 33 public had accountants (partners) and 17 accountants (public). Up to 2003, all professionals who had registered in the agency were 105 appraisals, 593 civil law notaries, 242 legal consultants. The government institution also registered 20 custodian banks and 12 securities administration bureaus.

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In the sector of regulation, the Bapepam obliges all capital market supporting elements to improve their synergy. A company which has function as securities underwriter needs to have paid-up capital Rp50 billion and net adjusted capital of Rp 25 billion.

A company which has function as securities broking and trading with client's account needs to have paid-up capital of Rp30 billion and net adjusted capital of Rp 25 billion. A company dealing with broking and trading with client's account needs to have paid-up capital of Rp 500 million and net adjusted capital of Rp 200 million. A securities company which has function as investment management is obliged to have paid-up capital of Rp 5 billion with net adjusted capital of Rp 200 million.

A securities company, which has function as broking and trading activities concurrently an investment management, is deemed necessary to have paid-up capital of Rp55 billion with net adjusted capital of Rp25,200 million. A securities company functioning as broking and trading with client's account and investment management also should come up with paid-up capital of Rp35 billion and net adjusted capital of Rp25.200 million.

The Bapepam also issued eight regulations in 2003, among others on management system of securities account in the Indonesian Central Securities Depository (ICSD), client's principles, bonus shares, futures contract, option, index, accountability of board of directors of the issuers on financial reports, work of auditory committee, net adjusted capital, listing procedures, right issue, the use of proceedings from IPO, asset-backed securities, public accountant and periodical financial reports.

With the issuance of the new regulations, the Bapepam until 2003 had issued 151 regulations on capital market, and revised regulations on script less and remote trading in the Jakarta Stock Exchange.

To tighten monitoring system in 2003, the institution had posted administrative sanctions to 83 listed companies, 23 securities companies, six custodian banks, three securities administration bureaus, 3 trustees, two appraisers and one commissioner of a listed company, liquidated 17 mutual funds, lifted out licenses on investment management, frozen one investment management, written warning to nine investment managements, fines to 23 investment managements and investigated custodian banks.

Crucial to foreign investors, in September 1997, the foreign ownership limitation was abolished, except for banks (49% of the total listed shares). In May 1999, the maximum number of listed shares and foreign ownership on Banks Company was set to 99%, based on the government regulation dated May 7, 1999.

Biggest Market Capitalization

Ten Biggest Market Capitalizations until June 2004 were as follows: 1. Telekomunikasi Indonesia Tbk (10.079.999.640), 2. Unilever Indonesia Tbk (7,630,000,000), 3. Gudang Garam Tbk (1,924,088,000), 4. Bank Mandiri Tbk (19,800,000,000), 5. HM Sampoerna Tbk (4,500,000,000), 6. Bank Central Asia Tbk (12,163,377,060), 7. Astra International

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Tbk (4,048,355,314), 8. Indosat Tbk (5,177,500,000), 9. Bank Rakyat Indonesia (11,647,057,950), 10. Bank Negara Indonesia Tbk (13,148,870,526).

Most Active Stocks (volume)

Ten most active stocks until June 2004 on the JSX were as follows: 1. Bank International Indonesia Tbk, 2. Bumi Resources Tbk, 3. Artha Pacific Securities Tbk, 4. Bakrie & Brothers Tbk, 5. Energi Mega Persada Tbk, 6. Bank Mandiri Tbk, 7. Kawasan Industri Jababeka Tbk, 8. Bank Buana Indonesia Tbk, 9. Bank Rakyat Indonesia Tbk, 10. Hortus Dana vest Tbk.

Most Active Stocks (Value)

Ten most active stocks till June 2004 were 1. Telekomunikasi Indonesia Tbk. 2. Bank Mandiri Tbk. 3. Astra Argo Lestari Tbk. 4. Bumi Resources Tbk. 5. Astra International Tbk. 6. Bank Rakyat Indonesia Tbk. 7. Bank Central Asia Tbk. 8. Indosat Tbk. 9. Bank Buana Indonesia Tbk. 10. HM Sampoerna Tbk.

Most Active Stocks (Frequency)

Ten most active stocks till June 2004 were 1. Energi Mega Persada Tbk. 2. Bumi Resources Tbk. 3. Artha Pacific Securities Tbk. 4. Asuransi Harta Aman Pratama Tbk. 5. Telekomunikasi Indonesia Tbk. 6. Hortus Dana vest Tbk. 7. Bank Mandiri Tbk. 8. Bank Central Asia Tbk. 9. Indosat Tbk. 10. Adhi Karya Tbk.

Top Gainers

Ten top gainers on the JSX till June 2004 were 1. Energi Mega Persada Tbk. 2. Panasia Filament Inti Tbk. 3. Bank Global Internasional Tbk. 4. Asuransi Jasa Tania Tbk. 5. Indoexchange Tbk. 6. Palm Asia Corpora Tbk. 7. Danasupra Erapacific Tbk. 8. Surya Toto Indonesia Tbk. 9. Panca Wiratama Sakti Tbk. 10. Suba Indah Tbk.

Top Losers

Ten top losers in June 2004 were 1. Cipendawa Agroindustri Tbk.2. Hortus Dana vest Tbk. 3. Asuransi Harta Aman Pratama Tbk. 4. Pelangi

Indah Canindo Tbk. 5. Ryane Adibusana Tbk. 6. Indofarma Tbk. 7. Maskapai Reasuransi Indonesia Tbk. 8. JAPFA Comfeed Indonesia Tbk. 9. Wicaksana Overseas Int. Tbk. 10. Sierad Produce Tbk.

Most Active Brokerage (Value)

Ten most active brokerage house in June 2004 were 1. DBS Vickers Securities Indonesia 2. Kim Eng Securities 3. CLSA Indonesia 4. JP Morgan Securities Indonesia 5.

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Danareksa Sekuritas 6. Artadwipa Persada 7. Semesta Indovest 8. ABN-AMRO Asia Sec. Indonesia 9. Mandiri Sekuritas 10. Merrill Lynch Indonesia.

Most Active Brokerage (Frequency)

Ten most active brokerage house in June 2004 were 1. Kim Eng Securities 2. Valbury Asia Securities 3. Trimegah Securities 4. DBS Vickers Sec. Indonesia 5. Sarijaya Permana Sekuritas 6. Danarreksa Sekuritas 7. CLSA Indonesia 8. GK Goh Indonesia 9. Ciptadana Sekuritas 10. Dhanawibawa Arta Cemerlang.

MANUFACTURING INDUSTRY AND TRADE

Policy in the sector of manufacturing industry and trade as the 1999-2004 Guidelines of State Policy underlines is aimed at: developing popular economy based on market mechanism, fair competition, and non-monopolistic practices; establishing a global-oriented economy by building competitive edge based on comparative superiority of being a maritime and agrarian state; empowering small-and medium-scale enterprises (SMEs) by improving the mastering of science and technology; and promoting bilateral and multilateral economic cooperation in the framework of augmenting exports.

Pursuant to Law No.25 of 2000, development of manufacturing industry and trade stresses on the establishment of micro, small, medium and cooperative undertakings, on the improvement of domestic products' competitive edge, and on the prevention and control of environments from any destruction and pollution.

In refurbishing the real sector in a short term in a bid to recover economy from crisis the Government has introduced industrial and trade revitalization scheme, focusing on: revitalization of various industrial branches; development of various industrial branches; rearrangement of industrial structure; advancement of industrial technology; and development of supporting industries.

This sector has in fact played a key and strategic role either in underpinning economic growth and improving productivity of the people engaged in or in creating job and business opportunities, in bringing in and saving foreign exchange, boosting regional developments, and improving the people's earnings as well as in alleviating poverty.

The world's economic order has been undergoing a more rapid and fundamental change due to mainly more widespread economic globalization practices and fast development of technology. In one aspect the fast technological advancement has been offering substantial benefits, but in another aspect it has caused impairment for a country to compete when the country is heavily relying on comparative superiority based on natural resources and abundant but unskilled labor.

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Bontang NGL plant, East Kalimantan

The shorter time cycle of a product indicates the faster technological development, many technologies being out of date. In the meantime the availability of natural resources in term of sorts, quantity and quality become rare and dwindle. This situation would make human resources becoming more-determining factor than other resources. This means that to have improved competitive edge and industrial competitive superiority based on skillful and creative human resources, technological and managerial capabilities is unquestionably-a prerequisite.

The main aims of improving the country's competitive edge are to augment foreign exchange from non-oil-and-gas exports, including from tourism industry, and to strengthen the country's economic viability. Short term measures having been taken to achieve the aims include maximizing the installed capacity of manufacturing industries by minimizing inefficiency of domestic and overseas trade, and by improving trade funding. Middle-term measures cover the strengthening of market institutions, and development of manufacturing industries having competitive edge based on comparative superiority which is underpinned by the advancement of science ad technology.

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The period of 2000-2004 saw a less-than-optimum increased utilization of installed industrial production capacity. In 2000 the utilization of installed production capacity of manufacturing industries was about 61.7 percent. It grew to 65.3 percent in 2003. Of chemical, agro-and forestry industrial group the production capacity in 2003 was recorded at 75.5 percent, or growing on an annual average of 1.9 percent during the last four years; and of metal, machinery, electronics and multifarious industrial group was 55.2 percent or increasing on an average of 0.4 percent per annum.

Manufacturing Industry

Manufacturing industry has been for the past ten years playing a prime mover of the country's economy by contributing the biggest share to the gross domestic products (GDP). For instance in 2002 this sector accounted for some 25.01 percent of the total GDP, compared to 17.47 percent of agriculture. In 2000 the share of manufacturing industry to the country's GDP was making up some 24.9 percent, and in 2003 24.7 percent. At the same time that of agriculture was 17.2 percent in 2000 and decreasing to 16.6 percent in 2003. Other sectors accounted for 57.9 percent in 2000 and for 58.8 percent in 2003.

Manufacturing industry is classified into four major groups i.e. large-, medium-, and small-scale industrial groups in addition to cottage or household industrial group. This classification is based on the number of workers employed without taking machineries of production used or capitals invested into account.

The number of large-and medium-scale industrial establishments in the whole indicated a decreasing tendency from 21,146 in 2002 to 21,126 in 2003 or a decrease of 0.1 percent. But individually the number of publication, printing and recording industrial group, rubber and plastic industrial processing group and motorized vehicles assembling group added by 56 establishments, 50 establishments, and 54 establishments respectively.

Those large- and medium-scale establishments altogether employed 4,364,869 workers in 2002 or a decrease of 0.5 percent from that of previous year. Expenses for those employees by those establishments in 2002 totaled Rp46 trillion or a decline of 12 percent from those of 2001, or an average of Rp10.6 million per worker per annum. The number of workers employed by large and medium industrial establishments was expected to increase quite high in 2002. So were their expenses for workers.

In 2002 the largest decrease of expenses for workers in large and medium industrial establishments was suffered by food and beverage industrial sub-sector, namely about Rp 5 trillion. The highest formation of fixed capitals occurred in machinery and its accessories industry, amounting to Rp5 trillion. Investment of fixed capitals at sub-sectors of leather and leather goods industry, and of metal goods, except of machinery, suffered a decrease of almost 50 percent.

Outputs of large and medium industrial establishments in 2002 recorded a rise of more than 30 percent to reach Rp882 trillion. The increase, however, required 26 percent

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additional expenses of input. At the same time, on constant market prices, the values of products made by the establishments grew at more than 21 percent to reach Rp 811 trillion. The increase was followed by the rise of raw materials by 23 percent or amounting to Rp 468 trillion.

Of the total production value in 2002, the sub-sector of food and beverages accounted for the biggest proportion of 15.53 percent, and growing to an estimated 16.98 percent in 2003. The sub-sector also earned from its products added value as much as Rp 40.5 trillion in 2000 and the figure was expected to reach Rp46.5 trillion in 2003. Wholly, the total added value of large and medium scale industrial establishments in 2002 noted a rise of 16.28 percent.

Dominating the country's industrial structure has been cottage industrial establishments, accounting for 91.26 percent. In 2002, small-scale and cottage industrial establishments added by 3.41 percent and 7.91 percent respectively compared to those of 2001. The number of employees absorbed by small-scale industrial establishments noted an increase of 0.37 percent, and cottage establishments 10.34 percent. By the increase, small-scale establishments were assumed to absorb a 4.42 percent additional workers, and cottage establishments 1.65 percent.

Output of small-scale establishments in 2002 swelled by 20.67 percent from that of 2002 or as much as Rp 7,155.7 billion, and that of cottage establishments by 21.29 percent. For 2003, output of small-scale establishments was expected to grow by 6.54 percent or as much as Rp2, 733.3 billion, and that of cottage 1.83 percent or as much as Rp720.8 billion.

Parallel with the increase of output value, the cost of input borne by small-scale establishments raised by 23.47 percent and cottage establishments by 27.69 percent. Added value of cottage industries in 2002 also noted a rise of 13.64 percent and an estimated rise of 13.64 percent in 2003. That of small-scale grew at 15.40 percent of Rp1, 850.4 billion in 2002, and an estimated 9.51 percent in 2003.

Promotion of Small- and Medium-Scale Industries

Development policy of small- and medium-scale industries puts priority on the promotion of small- and medium-scale industrial establishments at outer Java, particularly at rather isolated and remote areas, areas along borderlines with some neighboring countries and at the countries eastern part; empowerment of entrepreneurs of the industries and their institutions; betterment of business climate; improvement of prime services in term of management, system and supporting facilities; development of innovative and realistic schemes meeting all market players in real sector.

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Banana processing middle-scale industry. Banana is basic raw material for pasta

Development vision of small- and medium-scale industries (SMIs) is oriented to approach the year 2020 for the creation of people's economy-based SMIs that play a significant role as important mover for manufacturing industries in a whole. The main aims of the development of SMIs are the formation of modern and viable SMIs that can offer job and business opportunities as well as better income for SMIs entrepreneurs in a more equitable fashion; the formation of more viable and stronger industrial structure; greater number of technology-based SMIs; improvement of exported products made by SMIs.

By type, there are SMIs engaged in the industries of foodstuffs, in clothes, chemicals of construction materials, metal and electronics, as well as handicraft. Gross domestic product (GDP) of SMIs engaged in foodstuffs had amounted to Rp 9.740 trillion in 1998 before shrinking to Rp8.908 trillion in 2001. At the same time that of SMIs dealing in clothes augmented from more than Rp3.473 trillion in 1998 to more than Rp 5.808 trillion in 2001; of SMIs undertaking in chemicals of construction materials rose slightly from Rp12.123 trillion to Rp12.592 trillion, that of metal and electronics grew from Rp4.969 trillion to Rp5.741 trillion, and that of SMIs in handicrafts increased from Rp2.516 trillion to Rp4.207 trillion.

Production value of SMIs in foodstuffs based on 1993 constant prices suffered a decrease from Rp 31.793 trillion in 1998 to Rp 27.5589 trillion in 2001. At the same time that of SMIs in clothes swelled from Rp 9.548 trillion to Rp15.994 trillion; of SMIs in chemical of construction materials shrank slightly from Rp28.746 trillion to Rp 28.720 trillion; of SMIs in metal and electronics undertakings swelled from Rp11.711 trillion to Rp15.473 trillion; and that of SMIs in handicrafts undertakings rose from Rp 5.777 to Rp.7.114 trillion.

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Domestic trade

Trade sector has been playing a substantial role in the country's economy. It supports greatly the distribution of goods and services, meets the needs of people for staple foods, and promotes stability of appropriate prices. Trade activities are intertwining and inter-supporting with other sectors of production such as agriculture, manufacturing industry, mining, finance, transport and communications. Its practices embrace sheer areas to include inter-insular migration resettlements areas, areas at or along borderlines, and even rather isolated and remote areas, thanks to the availabilities of facilities of trading.

Development of domestic trade is very much related to the population growth rate, change of population age composition, distribution of population (that tends to the occurrence of urbanization), improvement and distribution of income, technological advancement, and change of the people's needs, tastes and life style following the betterment of their living standards.

Trade sector has served a substantial share in economic development as it is proved by the establishment of more viable trading system, the creation of relatively stable prices, the formation of job and business opportunities and trade facilities, and the development of exports as well as imports.

Retail business as part of the trade sector has been also featuring a heartening development in recent years. It was booming in 1996 or before the monetary crisis hitting the country. To encourage the business in 1999 the Government lifted the retail business from the investment negative list, allowing big foreign retailing players such as Sogo, Macro, Carrefour and Giant, to say some, to operate in Indonesia. How ever, in protecting local retailing players and traditional markets, the Government limits their operations to major towns or they are not allowed to operate at district or municipal towns. In 2002 alone there were 100 convenience stores, 802 supermarkets, including mini-markets, and 37 hypermarkets.

Loading and unloading activities at Bom Baru riverport in Riau

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Foreign trade

Overseas trade plays a key role in marketing oil and gas as well as non-oil and gas commodities. Some kinds of the country's products have proved themselves successful in competing in and gaining international market to bring in large amount of foreign exchange. In one hand in fact the country's export commodities destinations have been expanding, but on another hand large proportion of those exported commodities is still concentrating to several countries, and though sorts of non-oil and gas commodities have been growing more varied only some have export basis.

By the improvement of competitive edge of the country's non-oil and gas export commodities at international marketit is marked by the augment of exports in term of volume and valueand the betterment of non-oil and gas export structure as well as expansion of their market, it is expected that Indonesia would turn to be a leading and viable trade state.

During the period of 2000-2003 non-oil and-gas exports grew at an average of 5.67 percentfar in fact below the target of 11.9 percent. Non-oil and gas export value in 2000 reached US47.76 billion, before decreasing to US$45.1 billion in 2001, and swelling again to US$47.4 billion in 2002. The target was not attained due to chiefly the global economic slowdown as a direct effect of the September 11 tragedy, and tighter competition as well as some domestic unfavorable conditions such as high cost in getting documents of export and import, labor disputes, insufficient infrastructures and facilities to help boosting investment in export-oriented manufacturing industries, and the rampant illegal trade and smuggling practices.

In encouraging non-oil and gas exports in 2001 necessary measures were taken including the reduction of export tariff of some commodities and the improvement of textile quota management system. In this context market expansion to countries of non-quota has been carried out through various activities including selling missions, trade exhibitions, and trade diplomacy as well as the operation of overseas trade promotional offices in six cities (one each in Osaka, Los Angeles, Dubai, Budapest, Johannesburg, and Sao Paulo). For domestic market, centers for trade promotion have been established in Surabaya, Makassar, and Medan. A similar center is planned to be established at Banjarmasin.

Exports of oil and gas from 2001 to 2003 grew at an annual average rate of 1.2 percent. During the first five months of 2004 Indonesian crude oil price was averaging at US$33.3. The increase trend of oil in world market caused unfortunately trade balance deficit to Indonesia for the Indonesian oil export value was below its oil import value. Indonesia still records trade balance surplus when export value of gas was counted in.

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The country's sluggish economy has affected the import of non-oil and gas commodities. It plunged by 15.8 percent in 2001 before regaining by 0.1 percent in 2002 and 9.4 percent in 2003. At the same time, imports of oil dropped substantially by 17.5 percent in 2002 and 17.4 percent in 2003 due to mainly high degree of oil prices and domestic needs.

SMALL-MEDIUM ENTERPRISES AND COOPERATIVES

SMEs

The role of small-and medium-scale enterprises (SMEs) in endeavors to recover the country's prolonged economic crisis happening since 1997, has been significant. So has their contribution to the country's economic growth and the creation of job opportunities. Their contribution to the country's GDP during the 2002-2003 period noted an increasing trend to reach Rp1,013.5 trillion or some 56.7 percent of total GDP, meaning higher than that of the large enterprises did.

The number of SMEs also recorded an increasing trend; and their kinds of business more varying. So did their aggregate investment and imports. All of these have helped SMEs, more viable and strong as the country's economic backbone.

Products' added-value of small enterprises also noted a growing tendency: 39.7 percent in 2000 to 41.1 percent in 2003. At the same time, that of large enterprises on the contrary dropped from 45.5 percent to 43.3 percent. While that of medium-scale enterprises had been relatively stable at 15 percent.

Small-scale enterprises have always more advantages in businesses utilizing natural resources and in tertiary sector such as agricultural crops, plantation or estate, livestock, and fisheries, trade, hotel and restaurants. In each sub-sector, small-scale enterprises managed added value more than 75 percent during the 2000-2003 period.

The large-scale enterprises, meanwhile, gained some advantages in the advanced processing industries, in electricity, urban gas, communications, and mining. The added value they made in those sub-sectors reached some 60 percent.

The medium-scale enterprises at the same time played a leading role in making higher added value in the businesses of hotel, finance, leasing, services, and forestry.

In 2000, the growth rate of the middle-scale enterprises stood at 5.1 percent, of small- scale 4.1 percent, and of large-scale about 5.6 percent. In 2003, the medium-scale enterprises grew by 5.2 percent, small-scale 43 percent, and large-scale only 3.5 percent. Even though the growth rate of medium-scale enterprises was relatively higher, their contribution to the country's economic growth rate had been relatively smaller than that of other groups due to relatively little added value the group created. Medium scale enterprises' contribution to the national economic growth of 4.1 percent in 2003

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accounted for only 0.69 percent, compared to 1.69 percent of small-scale and 1.73 percent of large-scale enterprises.

Business Units, Labors and Productivity

The number of small-scale undertakings in 2003 was 42.4 million units, increasing by 9.5 percent against that of the year 2000. They employed 79 million workers, meaning a rise of 8.6 percent from the number of workers absorbed in 2000. The number of workers employed by small-scale undertakings during the period of 2000-2003 grew by 12.2 percent or an average of 4.1 per annum.

Productivity of small-scale enterprises also noted a significant increase from Rp8 million per worker in 2000 to Rp10.5 million per worker per annum in 2003. Those of medium-scale and large-scale were respectively Rp24.7 million and Rp1.5 billion in 2000, before augmenting to Rp31.8 million and Rp1.8 billion respectively in 2003.

The large-scale undertakings group is potential to be a pump-primer of economic growth, and the small-scale to be a balancing element of income equity and labor-intensive absorbing.

Exports of SMEs

Exports from products of SMEs reached Rp75.86 trillion or some 19.9 percent of the total exports in 2003, an increase compared to that of 2000, which accounted for 19.3 percent of total exports . The increase was attributed to the rise of exports of medium-scale from 13.9 percent in 2000 to 14.53 percent of total exports. There is a tendency that medium-scale enterprises focus on products of processing industries.

Investment

During the 2000-2003 period, investments in all economic fronts had been almost stagnant. Small-scale group attracted the least investment i.e. 18.6 percent on average per annum, compared to medium-scale group that could record at an average of 23 percent per annum. Combined, small-and medium-scale groups only absorbed investment about 41.6 percent per annum.

Compared to the total number of small-scale undertakings, it proved that small-scale undertakings are of low or not capital intensive establishments. During the period of 2000-2003, annual average investment in small-scale group amounted to Rp58.9 trillion and in medium-scale Rp73.2 trillion. It means equivalent to Rp1.5 million per small-scale establishment. It contrasts with what a large-scale establishment could absorb, namely Rp91.4 billion annually.

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Average Investment by an Establishment

(2000-2003)

Scale Investment Number of Investment per

(billion Rp) Establishments Establishment

Small 58,884 40,138,823 1.51

Medium 73,191 56,709 1,240.69

Large 185,043 2,024 1.51,424.2

Total 317,118 40,197,556 7.9

Small-scale group in 2003 recorded its investment growth at 2.1 percent; and medium-scale as well as large-scale at 0.01 percent and 2 percent respectively. Economic sub-sectors that absorbed the greater part of investment in large-scale group were services (35 percent), and electricity, gas and drinking water (18.2 percent). In small-and medium-scale the sectors were transport (29 percent and 20.4 percent respectively), and trade (16.5 percent and 15.2 percent respectively).

Small-and medium-scale groups, at the same time, supplied some 43.8 percent of the national demands for goods and services (small-scale accounting for 30.0 percent, and medium-scale 13.8 percent); and large-scale accounted for 42.1 percent of the total national demands, and 14.1 percent of imports.

In producing its goods, the small-scale group's dependency on large-scale enterprises' products was 14.9 percent, and on imported materials 5.8 percent; and that of medium-scale groups was 15.0 percent and 9.3 percent respectively. The small-scale group's output was primarily dedicated to household consumption (61.6 percent), and to exports (19.5 percent); that of medium-scale about 48.8 percent to household consumption and 30.0 percent to exports; and that of large-scale, the greater part to exports. It means that SMEs tend to be much more influenced by domestic economic dynamism rather than of large-scale enterprises.

Cooperatives

Cooperatives, in addition to SMEs, as the people's economic backbone, have been contributing meaningfully to the national economy. From one year to another the number of cooperative establishments showed a rising tendency: from 110,658 establishments in 2001 to 117,806 establishments in 2002 or an increase of 6.46 percent. They spread in

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Milk cooperative undertaking in Bondowoso, East Java

more than 391 districts and municipalities. At the same time, there were 23,635,088 members of cooperatives in 2001, before increasing to 24,040,448 in 2002. The number of employees working for cooperatives in 2001 was 202,947, and in 2002 was 209,058 or growing by 3.01 percent.

On the contrary, paid-up capital of cooperatives suffered a decrease, from Rp 28,038 trillion in 2001 to Rp 23,589 trillion in 2002 or shrank by 15.87 percent. Of Rp 23,589 trillion paid-up capital in 2002, Rp14,257 trillion (63.40 %) were external paid-up capital, and the remaining Rp8,632 trillion (36.60 percent) were internal paid-up capital.

Saving-Credit Scheme Cooperatives

Saving-credit cooperatives are cooperatives that receive savings from members, and in return offer credits to their members. The number of saving-credit cooperatives in 2002 was 1,265 or an increase of 1.2 percent compared to that of 2001. Their members totaled 586,207 in 2002 against 576,624 in 2001, meaning an increase of 1.06 percent.

The amount of their paid-up capital in 2002 noted an increase of 0.92 percent compared to that of 2001. Their internal paid-up capital accounted for some 29.67 percent, and external paid-up capital for 24.11 percent, and the remaining 46.21 percent were of members' savings. With the paid-up capital the saving-credit cooperatives owned plus their members' savings, the amount of credits channeled to their members noted a raise of 1.56 percent to reach Rp642.55 billion in 2002, compared to that of 2001.

Business Development Services (BDS) "Provider"

To improve the performances of SMEs and cooperatives, the Business Development Services (BDS) "Provider" has been formed and introduced. It functions not only to help SMEs and cooperatives finding working capital from financial institutions in order to improve their business activities, but also supervises them to recruit employees, better their management and help seek market opportunities as well as educate managers of SMEs and cooperatives to read market demands.

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Due to the important and strategic role the BDS has played, a number of foreign institutions such as the Japan International Cooperation Agency (JICA), and some domestic and overseas business agencies have been invited to improve professionalism of the BDS.

AGRICULTURE

According to Population Census 2000, some 60 per cent of the country's population earned their living from agriculture. However, statistics says that in 2003 some 56.5 percent of 25.4 million families of peasants or farmers belonged to the economically-weak bracket, cultivating land of less than 0.5 ha on average or were merely tenants.

Agriculture grew at 3.39 percent during the period of 1967-1976, and 5.72 percent in the period of 1976-1986, making these time Indonesia self-sufficient in food. The policy that stressed more on self-sufficiency in rice during the said periods led to rather unfavorable impact towards other types of food crops. Even though this sector still proved viable from the economic crisis the country suffered in the middle of 1997, it grew at only 1.57 percent the lowest rate the country had ever made.

Though almost all regions in the country suffered a rather long drought in 2003, agriculture was still capable of growing in a heartening trend. Cumulatively this sector (agriculture, forestry, and fisheries) up to the third quarter of 2003 noted a growing rate of 2.54 percent. Of the growth rate, foodstuff sub-sector grew on average 2.73 percent per annum, estate sub-sector 1.65 percent, and animal husbandry 1.40 percent. Thank to endeavors the Government, the public and business circle made to maintain such growth rate that the country's stockpile of foodstuffs suffered no shortage.

The country's agricultural performance has been to some extent influenced by the on-going domestic and global dynamism. The world's economy that grows at a lower rate would certainly cause an unfavorable impact to the country's economic growth. So would unfair practices of international trade such as excessive subsidies to agriculture in some developed countries since it would affect the competitive edge of products from the developing countries such as Indonesia.

Policies and Strategies

New paradigm has been currently adopted to develop agriculture, namely by developing a business system from downstream to upstream. Extensive socialization of this system is required to reach all levels of society, including politicians and legislators, that agribusiness should be managed not by the Government but by the society itself, to make it the prime mover of the country's economy.

In empowering peasants or farmers, direct aids for them have been made available. Up to 2003 some two trillion rupiahs had been granted directly to some 25,000 groups of peasants scattering in some 250 districts throughout the country, to finance their undertakings, their collective undertakings or cooperatives, the procurement of their tools

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and development of their skills and knowledge. The aid proved offering the peasants either positive impacts for the development of agribusiness or a multiplier effect to the development of the real sector of economy, and simultaneously become a stimulus for rural economic development. Other stimuli would be among other things increasing budget allocation either from state budget or regional budget that reflects serious commitment of the Government for the development of agribusiness, along with increasing the trend of domestic investment during the last few years.

Policies and programs having been introduced by the Government to encourage agribusiness include: maintaining sactorial cooperation, including with regional administrations; introducing various deregulations such as on pesticides, fertilizers, and agricultural tools and machines; facilitating the cultivation of seedling; encouraging peasants or farmers at rural areas to have more accesses to financial institutions; helping peasants or farmers to have more accesses to market and market information; producing excellent varieties of plants of food, horticultural, and estate crops; speeding up dissemination of technology; facili

tating the formation of synergic undertakings of agribusiness; protecting domestic agribusiness undertakings from unfair trade practices by other countries; improving skills and knowledge of peasants; reinforcing system of quarantine; and maintaining stability of unhusked rice prices.

Agricultural Products

Food crops

The year 2003 saw in general better performance of agricultural productions than those of 2002, though they were still below the target. Production of rice, for instance, grew 1.14 percent from 51.49 million tons in 2002 to 52.08 million tons in 2003, lower than the target of 53 million tons. Horticulture products, except of sweet potato, also noted an increase: production of corn up by 12.08 percent, from 9.65 million tons in 2002 to 10.82 million tons in 2003; soybean by 0.66 percent, from 673,000 tons to 674,000 tons; peanut by 5.77 percent; green pea by 8.20 percent; and cassava by 4.79 percent. The increase had in fact improved the country's viability of food supplies.

Horticulture

At the end of 2003, the harvested areas of vegetable consisting of spring onions, shallots, potatoes, cabbage, mustard green, and carrot, reached 316.7 thousand ha or a rise of 3.99 percent than that of 2002. Vegetable production at the same time amounted to 3.8 million tons, down by 3.46 percent due to primarily the decline of production of mustard green and shallot by 16.40 percent and 13.79 percent respectively.

Indonesian main fruit crops are avocado, mango, lanzon, durian, orange, salaks, pineapple, rambutan, banana, sapodilla, and guava. Java Island is the country's main fruit producer, except of durian, lanzon, and orange, which the island of Sumatra mainly

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produces. Within the Java Island, West Java is a major fruit producer, accounting for 33.61 percent of the Island's total production. Of outer Java, East Nusa Tenggara is also the main fruit producer.

Fruit production in 2003 declined due to chiefly the decrease of lanzon production from 208 thousand tons in 2002 to 116 thousand tons in 2003, down by some 44.2 percent, and that of avocado which decreased by 33.9 percent.

Plantation Estates

Plantation estates consist of large estates and smallholdings. Large-scale companies engaged in rubber plantation in 2003 numbered 453 establishments, cultivating a total planted area of 543.4 thousand ha; in coconut plantation, there were 230 establishments cultivating some 78.9 thousand ha; in oil palm, there were 882 establishments with total plantation area of 2,875.3 thousand ha; in coffee plantation 155 establishments tilling 60.7 thousand ha; in cacao plantation 222 establishments with 155.4 thousand ha; in tea plantation 144 establishments with 84.7 thousand ha; in kapok 25 establishments with 4.7 thousand ha, in quinine 16 establishments with 1.1 thousand ha; in jute, five es

tablishments with 1.3 thousand ha. In addition there were 88 companies engaged in sugarcane plantation, 19 companies of tobacco estates, and 16 companies of quinine estates.

Major products of large scale estate companies were palm oil (5,456.7 thousand tons), palm kernels (1,231.8 thousand tons), rubber (3,325 thousand tons), tea (122.6 thousand tons) and sugar (1,876.6 thousand tons).

Leading smallholding estates in term of the size of cultivated area in 2003 were respectively rubber (3,796.9 thousand ha), coconut (3, 803.6 thousand ha), oil palm (1,810.0 thousand ha), coffee (1,360.8 thousand ha), cacao (817.0 thousand ha), and cashew nut (604.1 thousand ha). In term of production, they were rubber (1,788.8 thousand tons), coconut (3,141.7 thousand tons), palm oil (3,648.8 thousand tons), coffee (669.4 thousand tons), and cacao (572.9 thousand tons).

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Smallholders cabbage plantation in Lembang, West Java

Animal Husbandry

The year of 2003 saw a rise of large livestock population: dairy cow grew at 2.90 percent, to 368.7 thousand heads; slaughtered cow went up by 0.87 percent to reach 11.4 million heads, buffalo by 2.18 percent to 2.5 million heads, and horse by 8.06 percent to 452.9 thousand heads.

So did the population of small livestock such as goat that amounted to 13.3 million heads or a rise of 5.79 percent compared to that of 2002, sheep eight million heads or a rise of 5.04 percent, and pig 6.3 million heads or a rise of 7.05 percent.

Also noting an increase was the population of poultry: native breed chickens in 2003 amounted to 85 million heads or a rise of 8.98 percent, broiler chickens 917.7 million heads or a rise of 6.08 percent, and ducks 48.1 million heads or a rise of 4.16 percent.

Large scale palm oil estate in North Sumatra Province 127

Exports and Imports

The exports of agricultural commodities (excluding those of fisheries and forestry) went up substantially by 26 percent in 2003 to a total of US$5.7 billion from US$4.5 billion in 2002.

The year 2003 also saw the net exports of agricultural commodities arising significantly from mere US$0.8 billion in 2002 to US$1.35 billion, an increase of 225 percent. Of the amount, the commodities of plantation accounted for US$2.91 billion, horticultures for US15.3 million, but animal husbandry suffered a decrease to US$139.4 million.

At the same time total imports of agricultural commodities recorded a rise of 4.94 percent to reach US$4.37 billion in 2003 from US$4.16 billion in 2002.

Exchange Values of Commodities

In general, the exchange values of agricultural commodities in 2003 were better than in 2002. In Java, the value increased between 2.59 percent and 31.11 percent. Of West Java, a province in Java Island, it grew by 4.84 percent, in Central Java 9.84 percent, in Yogyakarta 2.57 percent, and in East Java 31.11 percent. Of outer Java except of North Sulawesi, South Kalimantan and Bali, there was an increase of the agricultural commodities' exchange value. In West Nusa Tenggara it recorded a rise of 5.77 percent, in South Sumatra 4.23 percent, in West Sumatra 3.40 percent, and in South Sulawesi 2.27 percent.

Six out of 14 provinces which their agricultural commodities' exchange value was less than 100 percent were Lampung (74%), South Sumatra (74%), West Sumatra (91%), and North Sumatra (99%). If this exchange value was a reference of peasants' welfare, it could be reasonable to say that the peasants' welfare was improving.

Prospects of Agribusiness

Bullfrog farming for export commodity, at Pacitan, East Java

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Indonesia's economy for the year 2004 is envisaged to grow at 4.8 percent, and during the first quarter of 2004 it recorded a growth rate of 3.54 percent (based on constant prices). Recording the highest rate was among other things the agricultural sector (agriculture, forestry, and fisheries) that grew at 17.07 percent. Attributable to such growth rate in the sector were the sub-sector of food crops that went up by 54.99 percent and of animal husbandry by 6.69 percent. On the contrary, other sub-sectors such as plantation grew minus 22.29 percent, forestry minus 29.83 percent, and fisheries minus 8.92 percent.

The World Bank predicted that estate commodities such as coffee, tea and crude palm oil would increase. So would the price of rice to return to the level achieved in 2002. According to the prediction, meanwhile, economies of the developed countries would be growing at 1.5 percent, and of the developing countries at between 4 percent and 4.9 percent. At the same time the world's trade would go up by an estimated 4 percent.

The said trends would certainly affect economic development in Indonesia. Another factor that would also influence economy in Indonesia is the recovery of Iraq, for this country is one of the countries importing Indonesia's commodities. What is more, the exports of Indonesian coffee, cocoa, and pepper to the US would probably be affected by the imposition of the Bio Terrorism Act and stricter export procedures by the US. Market segment of Indonesian traditional export commodities would also probably dwindle by the admission of 16 East European countries to the European Economic Community.

In general, the exports of Indonesian agricultural products still have promising prospects in some regions such as the Middle East, South Asia and East Asia, but they will largely depends on creativities and shrewdness of Indonesian exporters to seek out and manage the opportunities.

In promoting the agribusiness, the Government has taken measures to among other things continue augmenting productivity and improving seedling system; to keep on schemes of direct financial assistance to peasants; to continue modernizing the agribusiness system and its production marketing as well as agricultural tools particularly in rural areas; and to continue struggling for fairer trade policy through the World Trade Organization.

Poultry and Bird Influenza Epidemic

The country's large number of population should certainly be a potential market for the production of chicken eggs and meat. These days the country's per capita egg consumption is 50-60 eggs annually, and per capita consumption of chicken meat is ranging from 3.5-4.0 kg per annum.

After being hit by the impact of the monetary crisis in the middle of 1997, the poultry industry in 2001 started indicating its recovery, and become a substantial economic mover. The poultry industry involved businesses worth estimated at Rp 50 trillion as it was reflected in the production of poultry feed of six million tons per annum, with price assumption of Rp 2000 per kg. In 2002 Indonesia was known as one of eggs-producing countries with cheapest cost of production and selling prices.

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During the period of 1974-1986, in which the country's economic growth rate recorded as high as seven percent per annum, the sub-sector of animal husbandry's GDP once accounted for some 25 percent of total contribution of agriculture to the country's GDP.

Modernization of animal husbandry in Indonesia began in late 1970s when the breeding of egg-laying chickens, broilers, and native-breed chickens had been developing rapidly. The chicken feed industry usually related to foreign investment also flourished.

Of the total 854 million chickens in 2004, broilers accounted for 524 million heads, native chickens for 263 million heads, and egg-laying chickens for 67 million heads. They were susceptible to viruses of the so-called "bird influenza" recently attacking several countries in East Asia. The Government officially admitted that this dangerous chicken disease attacked some provinces in Indonesia in January 2004. In protecting chickens and minimizing victims of the disease, the Government helped farmers in tackling the endemic by providing vaccine (Avian Influenza Vaccine), imposing bio-security, socializing and disseminating information related to bird influenza, and other preventive actions.

The number of chickens victimized by either bird influenza or Newcastle Disease (ND) etc., was 4.7 million heads or 0.05 percent of total population, relatively low indeed. However, the plague had caused Japan to temporarily stopping of importing chickens from Indonesia, and domestic consumption declined to the lowest ever of 20 percent of total supplies, and the prices of chicken meat dropped substantially. The price of feeds on the contrary soared because some 70 percent of materials were imported. The country's exports of poultry in 2002 amounted to US$4.8 million.

In tackling and eradicating bird influenza endemic, Indonesia along with other countries such as Thailand, Vietnam, Laos and Cambodia received emergency financial aid from the Food and Agricultural Organization (FAO).

Prospect for poultry industry of post-bird flu plague is still promising and its domestic market is still significant. Technological innovation in poultry industry is indeed required to improve output qualitatively and quantitatively. Also required is to improve the production of corn as one of prime raw materials for feed industry.

FORESTRY

The main aims of forestry policy are to maintain the preservation of forests for the improvement of public welfare; secure the existence of forests, optimize the benefit of forests; and reinforce forestry institutions. To achieve these aims, with reference to policy and strategy having been determined, there are five priority schemes put into operation in addressing the major issues of forestry: Illegal Logging Eradication scheme; Forest Fire Handling scheme, Forestry Restructurization scheme, Rehabilitation and Conservation scheme of Forest Resources; and scheme for Decentralization of the Forestry Sector.

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Illegal Logging Eradication Scheme

The scheme aims to secure and preserve forest resources, in order that forests are managed in a sustainable fashion. Under the scheme various activities have been done, including: maintaining close cooperation with the Police and the Navy in intensifying the operation to fight illegal loggers on the spots (such as under the Waralaga Operation that enforces a law upon illegal logging including transport and trading of illegal logs, and under the Operation of Wana Bahari done by the Navy to hunt down the transportation of illegal log by sea); and to intensify surveillance operations along the northern coast of Java to prevent smuggling of illegal logs from outer Java. International cooperation has also been maintained such as with the Governments of the UK and People's Republic of China in the context of curbing down and fighting the illegal trade of logs, and of improving law enforcement, as well as intensifying activities towards the establishment of conserved forests. Similar cooperation has also been organized with the Governments of Japan, South Korea, and with the Governments of countries joining in the Forum of Forest Law Enforcement Good Governance (FLEG), etc.

Forest Fire Handling Scheme

Under the scheme it has been and is being strived to prevent and minimize forest fire, and at the same time to protect people living around fires-prone forest areas. In this frame work, there have been spotted fire-susceptible areas that should be given high priority in dealing with forest fire. Those areas include North Sumatra, Riau, Jambi, Central Kalimantan, and East Kalimantan, with each area has already a Forest Fire Brigade. Early warning system is given priority to be developed in the context of preventive actions against forest fire. The early detection system on forest fires is taken from meteorology data satellite of the US National Oceanic and Atmospheric Administration (NOAA) and from the Geo-Stationary Meteorological Satellite (GMS-5), and from HIMAWARI of Japan. Cooperation has been maintained with donor countries in handling forest fires. The zero burning scheme has been also imposed upon forest concession holding companies to prevent forest fires.

Forestry Restructurization Scheme

The main aims of the scheme are to preserve forest resources and to manage them in order to provide socio-economic and ecological benefits for the whole Indonesian people; and to encourage the establishment of viable wood industries and of efficient wood industrial structure that can produce products of high quality and having competitive edge in global market. Execution of the scheme also covers: the implementation of sustainable production forest management being the manifestation of sustainable forestry development concept, to manage well the supplies of wood for industrial raw material and to secure that only legal logs and timber are available in the market; the implementation of forestry sector soft landing, namely gradual reduction of timber production from natural forests as an effort to curb down the destruction of forests; and the establishment of the Forestry Industrial Revitalization Agency to improve performance of the timber processing industries, which recently tend to decline. The

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agency is also tasked to endeavor the preservation of forest, explore the possibilities of employment and business opportunities.

Forest Resources Rehabilitation and Conservation Scheme

The scheme aims to secure and maintain the still unimpaired forests, and to accelerate the recovery of damaged forests. Through this scheme, economic and ecological values of forestry are expected to be optimum, and social conditions of the people living around the forest improve by getting direct benefits from it either as the doers or business partners.

By conserving forest resources it is hoped that the utilization of forest function and status ecologically, economically and socially can be maintained and even improved, and simultaneously animal population, types of plant, genetic germs and ecosystems existing in the conserved forests be protected and preserved.

To make the implementation of the scheme successful, various measures have been, are being and will be done to include: rehabilitation and reforestation programs of damaged forests and land of about three million hectares in five years, and 300,000 ha in 27 river basins;

arrangements of national and regional-scope master plans for forest and land rehabilitation; improvement of institutions engaged in forest seed under the auspices of the Indonesian Forest Seed Project (IFST) through maintaining bilateral, multilateral as well as international cooperation, and the establishments of Forest Plant Seedling Houses (already available are in Palembang, Bandung, Denpasar, Banjarbaru, Makassar, and Ambon); promotion of active participation of society in the program of forest and land rehabilitation, through a scheme known as "seed for people"; the development of social forestry to improve the management of forest and land preservation, to empower members of society particularly those who live around forest areas to enhance their welfare.

In the implementation of the scheme of rehabilitation of damaged forest and land, the Ministry of Forestry has provided Rp134 billion to 182 district administrations.

Decentralization Scheme of Forestry Sector

The scheme aims to promote the good organization of coordination of decentralization system in the field of forestry among related agencies and institutions in conforming to their respective authority and function in order to create harmony in actions to achieve better performance; and to create common understanding and perception on forestry decentralization system in implementing sustainable forest management in the context of regional autonomous system application. Regarding the decentralization system, various regulations which govern forest management, forest management planning, utilization and use of forest areas, urban forest, and reforestation fund, have been imposed.

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Ecology

Indonesia still has many parts of its territory covered by the luxuriant growth of the characteristic tropical rainforest vegetation, a type of ever-wet vegetation containing a large number of timber species. What makes the flora of Indonesia completely different from those of other countries as well as the flora of other tropical areas in the world is among other thing its high number of genera and species endemic.

As it is recorded, Indonesia has as many as 27,500 species of flowered plants or about 10 percent of the estimated number of flowered plant species in the whole world, and about 40,000 species of plant, or about 10-12 percent of the estimated number of plant species in the world. About 6,000 species of plants are known to be used directly by the local people. Indonesia has also some 1,539 species of reptile and amphibians (16 percent of the world's reptile). While its mammal accounts for 12 percent of the world's mammal; kinds of fish 25 percent, and kinds of bird 17 percent. Most of these species are found in forest areas which these days are suffering heavy pressures from different fronts such as animal smugglings, theft of germ plasma, timber illegal cutting, illegal hunting, illegal trade of protected species of flora and fauna etc.

Indonesia has a total forest area of about 120.25 million hectares or some 63 percent of the country's total land area. Of the area about 20.5 million ha constitute parks and reservation forests, about

33.52 million ha protection forest, 23.06 million ha limited production forest, about 35.2 million ha production forest, and about 8.07 million ha of convertible production forest.

Conservation forest area is divided into national parks (41 areas), nature recreation parks (89 areas), major forest parks (13 areas), hunting ground (15 areas), nature conservation (179 areas), and wildlife sanctuaries (51 areas).

Frequent landslide, flood, and pollution, draught, micro-seasonal changes, excessive and indiscriminative timber cuttings have to some extent degraded, depleted and damaged the forests. Unfortunately reforestation and land greening have not kept abreast yet during the past few years.

Forest Social-Economic Function

Numerous people have enjoyed the benefits, socially and economically, forests can offer directly and indirectly. Forests provide not only its main products such as many kinds of timber, and by-products such as rattan, resin, aloe wood, sandalwood etc, but also regulate the supply of water, prevent flood, and offer employment. For instance the total number of people earning their living directly or indirectly from forests was estimated at about 30 million. In 1997 employment in forests was estimated at 183 thousand.

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Forest Concession

Up to December 2002 there were 270 valid forest concessions, exploiting for about 28 million ha of forest. Of the total area, some 22.5 million ha belonging to 182 forest concession areas were managed by private companies, 339,240 ha belonging to five forest concession areas were run by state-owned enterprises, and the remaining 5.2 million ha belonging to 83 forest concession areas were administered by Joint-Venture companies between private and state owned enterprises.

In meeting the supplies of timber as raw materials for industries such as for pulp (for making paper) and other purposes, scheme of industrial timber concessions has been in operation for some years covering about 2,867,221 ha (up to the end of 2002) to produce 16,101,614 cubic meters (from 2000 to 2002).

The number of sawmill and wood working, plywood mill, pulp mill was 1,881 establishments with installed capacity of 44.77 million cubic meters far higher than the 18.60 million cubic meters raw materials can supply. In 2003 the Government imposed a regulation that determines a maximum of about 6.892 million cubic meters of timber per annum natural forests can supply. This limitation is intended to recover forests potentiality and to achieve balance between supply and demand of timber logs as raw material.

The Government revenues from reforestation funds (collected from forest concession holders) and other taxes and levies during the period of 1999-2002 amounted to Rp13.5 trillion.

An encouraging trend is that the number of people visiting nature tourist objects such as nature parks and conservation areas has been increasing. In 2001, for instance, there were 741,220 persons visiting nature parks, and 3,344,096 persons touring conservation areas.

TRANSPORT, POSTAL SERVICE AND TELECOMMUNICATIONS

Development of transport means and infrastructure continues taking place to make services much more efficient, reliable, qualified secure, and affordable, and to realize the national transport networks in inter-model system, and integrated with the regional development drive. They are designed to be part of the whole system of distribution, capable of offering services and benefits for the people, including making the rural and urban networks function properly.

The main aims of development of transport means and infrastructure are: 1) to rehabilitate and maintain the existing transport means and infrastructure in order that they function as they should; 2) to make them meet the standards of transport security services operation of domestic and international ones; 3) to create a much more favorable, fair and open business climate in the transport sector so that all business players such as state-run enterprises, private enterprises, as well as central and regional governments take part

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actively in providing transport services; and 4) to meet at least the minimum necessities of transport services in remote or rural areas.

In the context of improving and maintaining transport services, in the period of 2000-2004 priority was given to the development, rehabilitation and improvement of transport infrastructure of land transport, including inland waterways (river, lake and ferry transport), sea, and air transport

In making the traffic of goods and passengers services run more smoothly to reach even remote areas, and to link the centers of production and their market places, the Government has offered subsidies for the operation of pioneering transport services, in addition to the economic-class transport services for people of economically low-and-middle brackets. Enjoying the subsidy scheme for pioneering bus services, there were 50 pioneering bus routes in 2001, which increased to 92 routes in 2004.

Studies on transport-related measures covering legal aspects, institutional tariff and subsidy aspects as well as the aspects of human resources, have been and are being done to improve services. The studies have been so far leading to among other things final drafting of amendments to the existing laws in the field of transport (Law No. 13 of 1980 on Roads, Law No. 13 of 1992 on Railways, Law No. 14 of 1992 on Road Traffic, Law No. 15 of 1992 on Civil Aviation, and Law No. 21 of 1992 on Sea Transport). The amendments to these laws are designed among others things to reposition the real role and function of the Government in public transport services, to offer the private business sector and regional administrations more room to take part, and to take measures on tariff and subsidies more conducive to investment by private and state-owned enterprises, and competition fairer and healthier.

Road Transportation

Roads play a leading role in passenger and freight traffic. At the end of 2002 there were 22.99 million vehicles licensed for use on the roads in Indonesia, of which 73.97 percent were passenger cars, 8.12 percent trucks, and 3.10 percent buses. The number included inter-city buses serving public passenger services, which were numbering 19,370 in 2004, up from 17,613 in 2001. It is worth noting that the number of vehicles assembled at home in 2003 was 3.12 million units, an increase of 19.28 percent than that of 2002, of which motorcycles accounted for 90.21 percent, pick ups and vans 7.03 percent, buses for 1.46 percent, sedans 1.07 percent, trucks 0.28 percent, and jeeps 0.03 percent.

Improvement and repair as well as maintenance, along with new construction of roads, are continuously being made in the network of roads which are classified into road networks under the central government's management authority (which form a basic network linking major cities, industrial areas and ports), those under the management authority of provincial governments, and those under the authority of district/municipal administrations. The total length of road networks in 2002 was 368.4 thousand km, of which some 27.6 thousand km are under the management authority of the central government, 48.9 thousand km under the authority of provincial administrations, and

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291.8 thousand km under the authority of district/municipal administrations. Road widening and reinforcing of their surface structures have been made to some 3,000 km, in addition to the construction of 2,000 m of bridges along the road networks of Java's northern coast, Sumatra's eastern coast, Kalimantan routes and Sulawesi routes.

Some 850 km of roads and 1,000 m of bridges have been built to open up residential areas along and by the country's borderlines with a few neighboring countries, such as Jayapura-Wamena route, Flores-Seram routes, and road routes along borderlines at West Kalimantan, East

A bridge over Kahayan River in Central Kalimantan Province

Kalimantan (with Malaysia), at Papua (with Papua New Guinea), and East Nusa Tenggara (with Timor Leste), in addition to roads in Nias Island, Buru Island, Buton Island, Sangihe Island and Wetar Island. The road constructions in those places are also designed to speed up development in the country's less-developed eastern territory, and improve the role of residential areas along and by borderlines as international gateways.

Some 1,500 km of roads and 1,500 m of bridge were also built at Java's southern coast, at Sumatra's western coast including Ladia Galaska route (a land route linking Indian Ocean's coast to coast of Malacca strait via Gayo and Alas mountains) in the Province Nanggroe Aceh Darussalam. The Suramadu (abbreviation of Surabaya and Madura) suspension bridge that will link Surabaya and Madura across the Strait of Madura in East Java is under construction. Also under construction is the 40-km toll road between Purwakarta and Padalarang (West Java), which will shorten the drive time from Jakarta to Bandung to only about two hours from about four hours currently.

Road safety and facility

The country's road accident record had been considerable, making accident road traffic density high enough. To address the issue the Government has managed to construct and install road safety devices, including the installation of 1,185 traffic lights, 20,976 m of road safety fence, 11,500 traffic nail marks and road marks of 349,130 m mainly on

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national road networks. Still to minimize the effect of road accidents, it has been made compulsory to wear seat belts in the front sears of cars, and wearing helmets for motorcyclist.

In dealing with overloaded freight by trucks and container trucks, weighing bridge stations have been put into operation in many places including those having been built in West Sumatra, Riau and North Sumatra.

In offering the public in Jakarta much more comfortable services with relatively reasonable price, faster ride, the "Transjakarta" bus services has come into operation since the beginning of 2004 to serve the main route of Kebayoran Baru (South Jakarta) Kota (West Jakarta). It is also designed to help easing the city's heavy traffic. Also, in easing the city's traffic congestion two monorail systems have been planned.

Railways

Railway services in Indonesia are available only in Java Island, and Sumatra Island (North Sumatra, West Sumatra, and South Sumatra). The island of Kalimantan will have such services in a few years to come as preparations are being worked on. The state-run PT Kereta Api Indonesia (The Indonesian Railway Company) manages train services.

Railway facilities and infrastructure continue to be made available and modernized, along with improved services. This includes the construction of double-track rail and installation of electronic traffic signs in heavy traffic routes.

Rehabilitation schemes from 2001 to 2004 (up to August) included the betterment of rails as long as 71.8 km, betterment of rail traffic signs and telecommunication devices, and repairs of 18 units of diesel trains and three units electric trains, and improvement of a 118.25 km rail track of economy-class trains. In addition, there had been the procurement of 1,100 km of R-54 rail track, and construction of a 223 km double-track rail of Cikampek-Cirebon route, Cikampek-Padalarang route, Yogyakarta-Solo route are being done, and the Kutoarjo-Kroya route double-track rail is being prepared along with the reconstruction of railway in the Province of Nanggroe Aceh Darussalam.

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Pasar Senen train station

Passenger services

The passenger networks consist of inter-city network linking major cities in Java in particular; local stopping services; and commuter services in and around the large cities, especially Jakarta and its surroundings such as Bogor, Bekasi and Depok.

The Indonesian Railway Company PT KAI, runs inter-city executive services such as Argo Bromo train, Argo Bromo Anggrek train, and Bima train that operate on the Jakarta-Surabaya route, the Gajayana train that operates on the Jakarta-Blitar-Malang route, Argo Lawu train and Dwipangga train both operate on the Jakarta-Yogyakarta route, Gumarang train and Kamandadu train both operated on the Jakarta-Semarang route, Argo Gede train and Parahyangan train both operate on the Jakarta-Bandung route. The PT KAI also operates electrified services from Jakarta to Bogor, Depok, and Bekasi.

The PT KAI also provides special services for tourists, businessmen, and railway enthusiasts by operating Nusantara, Bali and Toraja trains, the coaches of which having facilities and interior decoration of Indonesian cultural nuance, and are equipped with bed rooms, meeting rooms, dining rooms, mini-bars, audio-videos etc.

In improving railway management, PT KAI started in the period of 2000-2004 adopting a financial scheme of Public Service Obligation

(PSO) for subsidizing the operation of economy-class passenger train services; Infrastructure Maintenance and Operation (IMO), and the Track Access-Charges (TAC) application to fund railways services.

The number of passengers transported by trains services in 2000 totaled 190.7 million, but in 2003 it dwindled to 150.7 million. The decrease was chiefly due to tighter competition the services had to face from other modes of transport, especially in inter-

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city services from air transport. While the number of passenger transported by commuter trains tend to increase.

On the contrary the total amount of freight handled by cargo trains rose from 16.8 million tons in 2000 to 17.99 million tons in 2003.

Inland Waterways and Ferry Crossing

The inland waterways, particularly big rivers in Sumatra, Kalimantan and Papua, play an important part in both passenger-and freight-carrying. Meanwhile ferry crossings play a key role in transporting passengers and freight from and to adjacent islands such as between Java and Sumatra, Java and Bali, etc, especially in view of Indonesia being an archipelago.

Development and rehabilitation of inland waterways and ferry crossings continue to improve services. In the period of 2000-2004, among other things 13 crossing beacons and 700 river buoys were installed, four crossing and river wharves rehabilitated, 30 crossing wharves and five river and lake wharves developed. In addition, there were some 277,529 cubic meters of mud along some shipping courses dredged.

To open up isolated and remote areas, ten vessels have been constructed and made available for serving pioneer crossing services. Subsidies are also provided for the operation of pioneer shipping services on 59 crossing routes.

The number of both passengers and freight carried on ferry crossings shows an increasing tendency. The number of passengers transported

Passenger ship that plies between Palembang and Muntok, both in Southern Sumatra

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by ferry crossing services in 2000, for instance, totaled 35.94 million, and the number swelled to 39.36 million in 2003. Total freight handled in 2000 amounted to 13.9 million tons before increasing to 14.4 million tons in 2003. The number of vehicles ferried in 2000 was 8.712 million units, but the number then shrank to 5.9 million units in 2003.

Sea Transport

Shipping has been playing an important role for so many, many years in transporting inter-island passengers and freight. So it is very reasonable the Government to always pay serious attention to the development of shipping facilities and infrastructure as well as improvement of its management.

Sundakelapa traditional harbor for inter-insular shipping

In the framework of developing sea transport services, marine facilities and infrastructure have been made available during the past few years, including the construction of a multipurpose wharf of 237.8 m in length at Kupang (East Nusatenggara), and a container wharf of 130 m in length in Bitung (North Sulawesi), the dredging of 10.7 million cubic meters of mud along some shipping routes, the rehabilitation of 101 units of supporting navigation instruments, the construction of two marine disaster prevention ships and three passenger ships of 2000 type, the installation of supporting navigation instruments (12 light houses, 22 beacons, and 119 floating beacons).

To make isolated and remote coastal areas and islands better accessible, eight pioneer vessels have been constructed and handed over to the administrations of North Sulawesi Province, Papua Province, North Maluku, and East Nusatenggara, and another five still under construction. In addition, subsidies have been provided for the operation of pioneer-shipping at 174 routes.

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In 2002 overseas freight loaded amounted to 163.34 million tons, up 5.76 percent from that of the previous year, and domestic freight to 139.95 million tons, up 1.96 percent.

Air Transport

Development and improvement of air transport facilities and infrastructure keep on going to improve services. Those include the maintenance of runways and terminals of 470,920 sq. m and 18,310 sq. m respectively; and expansion of runways and terminals of 431,179 sq. m and 1,811sq.m respectively. The runways and terminals of Manado airport in North Sulawesi and Ambon (Maluku) airport are among those undergoing expansion, to make them capable of handling larger aircraft and many more passengers and cargo. Concerning pioneer-flight, the Government has provided subsidies for some 317 routes.

Garuda aircraft was in the Netherland's Schippol Airport

The number of national fleet in 2003 was 545 aircraft, consisting of 369 fixed-wing aircraft and 176 rotary wing or helicopters. Of the number, some 185 fixed-wing aircraft and 13 helicopters belonged to the Government, and the remaining 184 fixed-wing aircraft and 163 helicopters were owned by private airline companies.

In 2003 a total of some 13,515,866 passengers traveled by air, swelling from 9,354,303 passengers in 2002. At the same time, the amount of cargo carried by air was 154,778 tons in 2002, and 225,450 tons in 2003.

For the year 2004 the Government allotted Rp33 billion for the development of pioneer-flight routes in Papua or Irian Jaya by the state run airline company PT. Merpati Nusantara, and Mimika Air.

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Meteorology

The institutional restructurization of the National Meteorology and Geophysics Agency took place in 2002 pursuant to Presidential Decisions No. 46 of 2002 and No. 48 of 2002. The restructurization aimed to allow the Agency function optimally and serve not only the interest of transport sector, but also those of other strategic elements such as agriculture, irrigation, forestry, water resources, and the public.

Included in the restructurization scheme is the modernization of the agency's instruments and their optimum use. Instruments added to the Agency's system comprise one unit of rain radar, six automatic weather stations (AWS), five automatic port weather devices, three units of accelerograph digital components, two units of three seismograph broadband components, three units of lightning detector, and one unit of gravimeter.

For improved meteorological and geophysics telecommunications, the Agency uses VSAT Link 32 Kbps, VSAT IP, transponder and LC. In addition, the Agency has developed a center for flight weather information services that meets international standards, in Soekarno-Hatta Meteorological Station.

Post and Telecommunication

Various efforts have been done to improve the services of Post and Telecommunications, among other thing through: 1. rehabilitation schemes of post and telecommunications infrastructures; 2.developments of radio frequency station and procurement of various devices for controlling illegal radio frequencies; 3. rearrangement of radio FM and television frequencies; 4. improvement of laboratory for telecommunications tests to help the supply of telecommunications devices meeting international standards.

The Government, through PT. Telkom, continues to improve telecommunication services. During the period of 2000-2003, PT. Telkom had added to its system some 1.68 million telephone connections to make the total installed capacity of the company's telephone centre amounting to 10.15 million telephones lines, with used capacity of 8.73 million of telephone or a 3.5 percent penetrating level.

In 2003, mobile communications or cellular telephone subscribers totaled 11.3 million, a substantial increase from more than 3.6 million in 2002.

Telecommunications and information are growing rapidly during the past few years. In anticipating this trend, the Government has enacted Presidential instruction No. 6 of 2001 on the development of telecommunications and information technology in Indonesia. During the period of 2002-2003, internet subscribers grew by 140 percent to reach 865 thousand, and the users of internet services swelled by 320 percent from 1.9 million in 2002 to eight million in 2003. Currently, fixed line telephone ratio is 3.6 per 100 populations, and that of cellular telephone is 5.5 per 100 populations.

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In meeting public service obligation (PSO), and universal service obligation (USO) in field of post and telecommunications, the Government in 2003 provided PT. Pos Indonesia with compensation fund, and built telecommunications facilities in 3,016 villages, and in 7,500 villages in 2004.

During the period of 2000-2004, the postage consumption for domestic mail and for overseas mail noted a decreasing tendency: domestic mail in 2002 amounted to 282.6 million pieces, down by 24.6 percent from that in 2001. At the same time overseas mail amounted to 11.7 million, down by 39.0 percent from that in 2001.

There were 7,147 post offices in 2002 throughout the country, consisting of 207 main post offices, 2,496 auxiliary village post offices, and 3,544 postal services kiosks.

MINING

Mining sector still plays an import role in economic force, and accounts for a substantial share in the country's endeavor to recover from its economic crisis. Production of oil and gas has been always quantitatively influencing the economy because the production constitutes one of the basic assumptions in planning the annual state budget.

Indonesia is in fact rich in minerals in addition to its oil and gas. Those minerals include tin, copper, nickel, silver, coal, and gold that spread throughout the country.

Due to the important role the sector does play as foreign exchange earner, measures taken in this sector give emphasis on the development of its means and infrastructure to make it self-sufficient in meeting the domestic needs and even exports, as well as in supporting the efforts of economic recovery.

During the past five years the sector of energy and mineral resources has been growing averagely at minus 2.9 percent per annum. In 2003, production of oil dwindled to 456.3 million barrels from 474.9 million barrels in 2002. Gas production, on the other hand, increased slightly to 3,057.8 million Mscf from 3,041.8 million Mscf in 2002.

Government revenues from energy and mineral resources in 2003 amounted to Rp 79,579.4 billion or some 110 percent of the targeted Rp 72,456.2 billion. Of the total amount in 2003 revenues, oil and gas contributed as much as Rp 78,507.4 billion, and other minerals resources Rp 1,072 billion.

Oil and Gas

Gross revenues from the selling of crude oil in 2003 reached US$11.508 billion or some 112.85 percent of the amount targeted in the 2003 state budget. Gross revenues of gas at the same time, amounted to US$8.615 billion or some 108.49 percent of the target. Oil lifting realization in the year reached 400,621 million barrels or some 84.6 percent of the targeted 463,556 million barrels and that of gas reached 2.392 million metric british thermal units (MMBTU) or some 96 percent of the targeted 2.491 billion MMBTU.

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Average price of Indonesian crude oil in 2003 was US$28.73 per barrel or some 30.6 percent above the price fixed for the 2003 state budget of US$22 per barrel.

In speeding up the economic recovery, the Government in 2003 signed agreements on 15 oil and gas working contracts in land and off-shore areas with total commitment of US$140.9 million for the period of three years. Investment realization of production sharing contracts in

2003 amounted to US$3,971 million for exploration, US$2,510 million for production, and US$329 million for administrative matters.

Investment in the down-stream sub-sector in 2003 took place by the issuance of approvals for 20 oil refineries, and one LNG refinery and one LPG refinery, as well as 13 principle agreements on oil and gas supply through pipelines.

In 2004, the Government offered working areas in oil and gas through tenders and direct offers. Cooperation contracts for seven blocks were agreed through direct offer and were signed in March 2004 and ten other blocks in August 2004. The seven blocks are Bulungan, Nunukan, Tingau and Ambalat Timur (East Kalimantan), Seruai (Nanggroe Aceh Darussalam), Lubuk Linggau (South Sumatra), and Boven Digul (Papua or Irian Jaya).

The Government planned also to invest as much as US$7,482 million in up stream oil industry, of which US$779 million for exploration activities, US$2,096 million for development activities, US$3,921 million for production activities, and US$686 million for administrative matters.

It is predicted that crude oil production in 2004 would reach 1,150 million barrels per day, up from 1,081 million barrels in 2003; and of gas, it is predicted to increase to 6,58 billion cubic feet (BCF), from 6,28 billion cubic feet in 2003.

The country's current total oil refinery capacity is 987 MBCD or 360 thousand MBBL. Oil refineries are available in Pangkalan Brandan, Dumai and Plaju (Sumatra), Cilacap, Cepu and Balongan (Java), and Balikpapan (Kalimantan).

Indonesia, the world's top rank LNG producer, in 2003 exported 35.66 billion cubic meters; of the amount, 24.05 billion cubic meters were exported to Japan, 6.93 billion cubic meters to South Korea, and 4.68 billion cubic meters to Taiwan. Its proven gas deposits are estimated at about 90.3 trillion cubic feet, or accounting for 1.5 percent of the world's total deposits.

In augmenting foreign exchange earning, in 2003 a working contract of natural gas supply through piped transmission of 100 million cubic feet a day for a duration of 15 years, was signed by Indonesia and Singapore. The contract is worth US$1.10 billion.

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For the year 2004, a contract of an additional natural gas supply of 50 million cubic feet per day through piped transmission to Singapore with selling value of US$0.77 billion, has been also agreed and signed. The supply will last for 12 years. In addition, Indonesia signed in 2003 a contract to sell more than three million tons of LNG from the Tangguh field, Papua, to the US (3 million tons), South Korea (1.15 million tons) and to China (2.6 million tons). Also in 2003, Indonesia exported LNG as much as 1.359 billion MMBTU, LPG as much as 1,105 MT, and crude oil 59.87 million barrels. For domestic needs, the total consumption of oil reached 57.40 million kiloliters, of which 26.71 million kiloliters for need of transportation, 7.58 million kiloliters for industries, and 11.65 million kiloliters for households.

It is the current Government's commitment to continuously reduce oil subsidy by increasing retailed oil prices. In 2001 subsidy for oil amounted to Rp36.40 trillion; it dwindled to Rp32.29 trillion in 2002. In 2003, it reached Rp26.02 trillion, or above the targeted Rp13.2 trillion.

Coal

Indonesia is one of the world's leading coal producers, ranking third after Australia and China. The country's estimated coal reserve deposit is 5.22 billion tons, the greater part of which is available in Sumatra and Kalimantan.

In 2004, coal production is expected to reach 119.7 million metric tons, up from 106.7 million metric tons in 2003 and 100.6 metric tons in 2002.

PT Adaro Mining Company is currently the country's leading coal producer with coal output of 22 million tons per day. Trailing behind are the mining companies Kaltim Prima Coal (18 million tons, plans to produce 24 million in the near future), PT Arutmin (14.5 million tons), PT Kideco (12 million tons), PT Tambang Batubara Bukit Asam (11 million tons), and PT Berau Coal (8 million tons).

The main importers of Indonesian coal are Taiwan, South Korea, Japan, and India.

Parakan special coal pier in Tarahan, South Sumatra in

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Tin production indicated a declining trend. While its total production still reached 88,142 million metric tons in 2002, in 2003 it could produce only 71,695 million metric tons. So did its exports. In 2002, the country exported tin as much as 62,031 tons, in 2003 it could manage only 5,798 tons.

Gold and Silver

Gold and silver reserve deposits are scattering in several sites, among other things in Papua, North Sulawesi, West Nusatenggara, and West Java. PT. Freeport Indonesia is the country's largest private gold mining company, with its total selling reached 2.5 million ounces of gold in 2003 or a raise of eight percent compared to that of 2002 amounting to 2.3 million ounces. The company has an estimated gold reserve deposit of 64.5 million ounces. With its fixed production assumption, the reserve can last for about 15 years.

The state-owned gold mining company PT Aneka Tambang operation in West Java could produce gold of 4,176 kg and silver of 28,570 kg in 2003. Private gold mining company operating in West Nusatenggara could produce gold of 585,000 ounces.

The country's total gold production dwindled to 141,019 kg in 2003 from 142,238 kg in 2002, and that of silver shrank from 288,806 kg in 2002 to 278,986 kg in 2003.

Nickel

Production of nickel ore in 2003 noted a slight increase to 4,395 metric tons in 2003 from 4,366 metric tons in 2002. Part of nickel ore is processed to be ferronickel, the production of which reached 17,803 metric tons in 2003, declining from 42,306 metric tons in 2002. In addition, nickel ore is also processed to be nickel matte produced by PT. Inco. In 2003, total production of nickel matte was 15.5 million pounds, up 18 percent from 13.21 million pounds in 2002.

Copper

In 2003, production of copper concentrate reached 3,238 million metric tons, decreasing from 3,786 million metric tons in 2002. This concentrate was dug from the Grasberg copper-pit managed by the PT Freeport Indonesia. This copper-pit has reserve deposit of an estimated 2,500 metric tons. One ton copper concentrate contains 1.13 percent of copper, 1.05 percent of gold, and 3.8 percent of silver.

Another copper mining is being worked on in Batu Hijau, Sumbawa Island by PT Newmont Nusa Tenggara by investing about US$1.9 billion. Reserve deposit of copper in Batu Hijau is estimated at 1,000 metric tons; one ton of copper concentrate contains 0.52 percent of copper, and 0.4 percent of gold. The reserve deposit can be mined for and estimated 25 years, with annual production is expected to reach 245,000 tons of copper concentrate and 18 tons of gold concentrate that are exported to Japan, South Korea, Spain, India, the Philippines, Germany and Bulgaria.

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Bauxite

Production of bauxite in 2003 suffered a slight decrease to 1,262 million metric tons from 1,283 million metric tons in previous year. The greater part of bauxite is exported to China and Japan.

Electricity

There are two main electricity grids in Indonesia: the Java-Bali electricity grid, which is interconnected by extra-high voltage networks; and the outer Java-Bali electricity grid, which has not been interconnected yet, using small and medium capacity electricity generation plants such as diesel-power plants.

The state-owned electricity company Perusahaan Listrik Negara (PLN) supplies most electricity. It is also responsible for the operation and maintenance of power stations and the national grid. Not all the country's territory is covered by the national electricity grid managed by the PLN, so non-PLN bodies such as cooperatives or small private companies manage the supplies, particularly for remote rural areas.

Eleven area electricity boards and four regional electricity distribution boards of PLN are responsible for the distribution and for the retail sale of electricity. Installed capacity of electric power plants in 2002 amounted to 21,114 MW with total production of 108,360 thousand MWh. In 2003, with almost unchanged installed capacity, production was increasing by 8.53 percent to reach 117,605 thousand MWh. Sales of electricity in 2003 amounted to 89,879 MWh, or 3.20 percent higher than that of 2002.

The state-owned company PLN currently operates 41 hydro-power plants with installed capacity of 3,266 MW, producing 10,536 gigawatt hours (GWH). The need for electricity in Java and Bali is supplied by several hydro power plants with total installed capacity of 2,500 MW. Those plants are Area I (33.5 MW), Area II (54.5 MW), Saguling (695 MW), Cirata (1,000 MW), Area III (124 MW), Mrica (176 MW), Area IV (40 MW), Sutami (102 MW), Brantas-Non Sutami (125 MW), and Jatiluhur (179 MW).

Out of the total consumption in 1990s, industry took 49.2 percent (13,644 GWH), commercial 10.3 percent (2,849 GWH), and public 8 percent (2,244 GWH). In 2001, industry took 41.9 percent, household 33.34 percent, and commercial 13.5 percent. The number of households using electricity supply in 2001 was 27.9 millions, making the electricity ratio in Indonesia reach 60.3 percent. The number of villages enjoying electricity supply, at the same time, was 31.2 thousand or 79.4 percent of the country's total villages.

In bettering its national grid and in overcoming short supply, the PLN is to invest Rp5.9 trillion in 2004, of which Rp 2.8 trillion for building transmission networks, and Rp3.1 trillion for distribution expansion. The company is also to complete the Java southern transmission networks to improve the security of electricity supply in Java-Bali

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interconnection. In addition, the company plans to build two hydro-power plants in Raja Mandala, West Java, with a capacity of 60 MW.

In augmenting the supply of electricity, small-scale private electric companies are encouraged to sell their products to the State-owned electric company PLN. Meanwhile, to make remote villages capable of enjoying the supply of electricity, the Government encourages companies dealing in the supply of electricity to develop micro hydro-power plants and sell their production to the PLN.

MARITIME RESOURCES AND FISHERIES

Being an archipelago, Indonesia has a total maritime area of 5.8 million sq km and coastline of some 81,000 km, and is rich in maritime natural resources which have not been optimally exploited. Thus this sector is still expected to be a substantial economic mover in the years to come, particularly to help accelerate economic recovery and simultaneously improve the people's welfare.

Responsible for policy, development and promotion of maritime resources and fisheries is the Ministry for Maritime Resources and Fishery.

The main aims of maritime and fisheries policies are the improvement of the welfare of Indonesian fishermen and fish farmers in particular and the whole Indonesian people in general, and that the development of maritime resources and fisheries is made in a sustainable, wise and environment-friendly manners. It means that the development is based on a sustained development conception, underpinned by development of maritime and fisheries industries having excellent human resources to produce highly competitive products.

In advancing the maritime and fisheries sector, some schemes were introduced in 2003. They include: empowerment scheme of people who are engaged in fish farming and are living at coastal areas; scheme for improving the growth rate of fishery-based businesses in the sector of maritime and fisheries; rehabilitation and conservation schemes of marine natural resources and fisheries and their ecosystems; scheme for enhancing the role of Indonesian waters as the unifying element of the Indonesian Nation and marine culture; development scheme of technology and information system of maritime and fisheries natural resources; and international cooperation development scheme.

As a maritime state Indonesia is rich in fish in term of quantity and variety. The country's maximum sustainable yield of sea fish is estimated at 6.4 million tons per annum, spreading in nine major maritime zones. The potency includes demersal and pelagic fish catch, sea cultured fishery, brackish cultivated fish, marine biotechnological fish as well as fresh-water cultured fish. Altogether their total potential economic value is estimated at US$82.06 billion.

During the past three years, the maritime and fisheries sector has developed more rapidly to offer a meaningful contribution to the country's economy. In 2000 and 2001, the GDP

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of fisheries sub-sector grew at an average of 15.65 percent per annum. In 2001 GDP of fisheries sub-sector amounted to about Rp34.67 trillion or accounted for about 2.33 percent of the country's GDP. In 2002, the contribution of the fisheries sub-sector to the country's GDP amounted to Rp46.61 trillion or constituted about 2.39 percent of the total GDP. In 2003 it amounted to Rp.44.79 trillion or made up 3.1 percent of the country's total GDP.

During the period of 2000-2003 fish products noted a rise of about 5.21 percent per annum from 5.07 million tons in 2000 to 5.94 million tons in 2003.

Fresh water fish farming in Riau

Exports of fish products in 2001 amounted to 0.48 million tons, bringing in a foreign exchange earning of US$1.63 million. The export value of fish products in 2002 declined to US$1.57 million with export volume reaching 0.51 million tons, but in 2003 export value swelled to US$2 billion with export volume of 696 thousand tons.

Of the total fish production, sea fish catch still constituted a dominant proportion. Sea fish catch grew at an average of 4.58 percent per annum from 4.521 million tons in 2002 to 4.728 million tons in 2003. Contribution of cultured fish to the country's total fish production reached 19 percent in 2000, and it increased to 21 percent in 2003. That of sea fish catch, on the contrary, slightly dropped from 81 percent in 2000 to 79.5 percent in 2003. At the same time, the growth rate of cultured fish production was 7.04 percent, higher than that of sea fish catch production that grew at about 4.76 percent only. Thus it is reasonable that the development of cultured fish has been given priority in the development of fisheries.

As cultured fish production has an increasing tendency, so has the area and establishments of cultured fish. In 1999, the total area of cultured fisheries was 594,176 ha run by 80,919 fish farming establishments. The area and establishments then expanded to 730,090 ha and 315,000 fish farming establishments respectively in 2003 or growing at 5.3 percent and 43.6 percent respectively. While the growth rate of area for sea cultured fish, sea caged-fish farming, and floating net caged sea fish farming was 56.9 percent, 35.2 percent, and 28.3 percent respectively.

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Domestic fish consumption in 2001 reached 4.69 million tons, and 5.30 million tons in 2003. During the period of 2001-2003, domestic fish consumption rose at an average of 6.14 percent per annum.

Attributable to the increased fish production during the last three years had been the bigger number of fishing vessels and even fishing boats being operated and modern technology applied to augment productivity. The number of fishing vessels rose by 1.83 percent per annum from 449 thousand in 2000 to 474 thousand in 2003, with composition of larger-size vessels bettering to make increasing number of employment. In 2003 there were 3.4 million fishermen and 2.2 million cultured fish farmers.

Various schemes have been introduced to empower fishermen, cultured fish farmers and communities living at coastal areas. The schemes include: scheme for improving productivity of economic activities; cultured fish intensification scheme for shrimp, kerapu, seaweed, and nila fish; rural fish farming development scheme; development scheme for small-scale sea fish catch undertakings; and promotion for collective fish farm undertakings.

The scheme for improving productive activities of coastal communities has been implemented up to 2004 in 527 districts throughout the country.

Illegal Fishing

Having sheer waters territory, Indonesia is faced with rampant illegal fishing within its seas by foreign fishing vessels, particularly within the country's 200-mile limits of its Exclusive Economic Zone (EEZ). In 2003 alone the Indonesian Government was successful in capturing a number of foreign vessels fishing illegally on the country's waters territory, securing the country of about Rp.1.055 trillion in potential loss.

In minimizing illegal fishing by foreign fishing vessels, the Government has imposed a decision that allows no more than 900 foreign fishing vessels to operate in the 200-mile EEZ limits. Before the decision took effect, there were estimated 7,000 foreign vessels fishing illegally.

Also in overcoming such illegal fishing, the Indonesian Government has taken some anticipative measures, among other things, encouraging local fishermen to improve their fleet and fishing equipments, improving licensing system for fishing businesses, reinforcing law enforcement and the imposition of fish catch control, promoting coordination among related government agencies such as among the Ministry for Maritime and Fishery and the Police, the Navy etc. In this context, the Government has maintained and improved cooperation with the governments of the People's Republic of China, the Philippines, and Thailand. During the period of 2000-2003 law enforcers had handled and settled 186 criminal cases in the field of maritime and fisheries.

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Sea Sand Exploitation

In dealing with the control and surveillance of sea sand exploitation the Government has issued Presidential Decision No. 33 of 2002 on Control and Surveillance of Sea Sand that governs the mechanism of control and exploitation of sea sand, and the formation of an ad hoc institution, the Team for Controlling the Exploitation of Sea Sand. The Team is tasked to mainly manage and run the mechanism. So far the Team has issued regulation on quota and zoning areas for the exploitation of sea sand. Meanwhile, the regulation on exports of sea sand is governed by Decision of the Minister of Industry and Trade No. 598 of 2003. With the imposition of the sea sand exploitation zoning areas, some 50 percent of sea sand exploitation areas are closed.

Marine and Coastal Areas Ecosystem

In pursuing an improved quality of the ecosystem of seas and coastal areas, endeavors have been made to manage integrally the resources of seas and coastal areas. The main aims of these endeavors are to improve and preserve sustainable exploitation of natural resources for the interest of environmental and socio-economic development in helping governmental decentralization. Activities of these endeavors include: the arrangement of seas, coastal areas and islets management, of which eight arrangements have been enacted to be Regional Ordinances, while others are being processed; rehabilitation of coral reefs in six provinces covering 12 districts; designation of local seas conservation in four locations; and the national campaign for cleaning the seas and coastal areas from organic litters.

Regarding the management of islets which are many in number, the Government has identified their basic data. It has also built some facilities and infrastructure such as communication devices, solar-system electric power installations, and the construction of mini ice plants in several islets. Rehabilitation of mangrove forests, along with planting of coral reefs, and construction of coastal protective structures has also been done to maintain the ecosystem in a number of islets.

National Campaign

To more advance the maritime and fisheries sector, in October 2003 at the Tomini Bay, South Sulawesi, President Megawati Soekarnoputri launched the national campaign for maritime and fisheries development. The major aims of the campaign are to manage and maximize the exploitation of the sector, and to address all marine problems through synergic efforts by communities, government, and business circles.

In short-term, the campaign aims to build infrastructures for both sea fish catch landings and cultured fish farming. The years 2004 and 2005 would be the phase of preparatory to reinforce the ground of the scheme as the continuity and improvement of the on-going development. Kinds of fish to be cultured and developed are fish having high economic values, profitable and much in demand by both domestic and international market. Infrastructures and facilities to be constructed include industries to process cultured

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shrimp, seaweed, mollusk, and patin fish as well as sea fish catch. Necessary infrastructures and facilities are to be made available in some 89 islets along the country's borderlines, and other islets and islands to control pollution on seas. The same things are to be developed to promote marine tourist potential at coastal areas and islets, to develop small-scale fish catch undertakings in all provinces, and to safeguard resources of illegal fishing, which has an estimated economic value of about US$2-US$4 billion per annum.

Research Center

In 2003 Indonesia initiated the establishment of an ocean research center named the Southeast Asia Center for Ocean Research and Monitoring, which is located at Perancak, Bali Island. The construction of the center received financial assistance from several countries including the US, Germany, France, the UK, and Australia. Indonesia has been selected as the site of the center due to chiefly to the fact that Indonesia has seas with highest bio-variety in the world.

The main aims of this center establishment are : to improve marine monitoring and research in Indonesia and Southeast Asia region; and to run meteorological monitoring system for monitoring local or sub-regional weather conditions.

The center provides information on various matters, such as fishery, cultured fishery, satellite monitoring on weather and seasons, transport, marine tourism, sea pollution, and marine technological innovations. It also serves information on marine resources management, maintenance of coastal and marine environments, mining at the deep-seas and coastal areas, and environment-friendly energy.

Joining the center are noted international institutions such as the National Science Foundation and NOAA of the US, the CSIRO and AIMS of Australia, CLS-Argos and Spot Image of France, JIFIC, JICA, Chiba University, Restec Mitshubishi Corp of Japan, Canadian Space Agency, Radarsat International of Canada, BMBF of Germany, Korean Ocean Research and Development Institute of South Korea.

MANPOWER

Pursuant to the 1945 Constitution, Article 27 clauses (2) the development of manpower aims to provide jobs and business opportunities for the working population to enable them to have jobs and earn their proper living. Furthermore, the 1999-2004 Broad Outlines of State Policy stipulates that the comprehensive and integral development of manpower aims to improve the competency and self-capacity of manpower, better wage, secure the welfare of manpower, and to protect manpower and the freedom to associate. In addition, the Policy also envisages the improvement of quantity and quality of manpower to work abroad by taking into account their competency, legal protection, and legal defense which are managed integrally to prevent the emerging of manpower exploitation.

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Based on the policy there are various programs introduced, including: expansion and development of job opportunities scheme; improvement of quality and productivity of manpower scheme; program of social security system development; and social insurance program.

Labor Force

The total working population of Indonesia in 2003 was 152.6 million, of which some 60.37 percent of them were in Java Island. Labor force participation rates (LFPRs the number of population classified as labor force for every 100) of the country in 2003 recorded a decrease to

Women working at a tobacco company

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65.72 percent from 67.76 percent in 2002. The total number of labor force in 2003 was 100.3 million, of which some 90.50 percent had been working, with lower level of education (secondary school and under) accounting for 76.78 percent and the remaining 23.22 percent of higher level of education (college and university).

Employees in Indonesia in 2003 numbered 23.8 million or some 26.25 percent of the country's total working population. Mostly they worked at the service sector, manufacturing industries, trade sector and agriculture. At the same time the number of population employed totaled 41.4 million, comprising self employed (40.23 percent), self employed assisted by temporary employees (53.23 percent), and employers (6.54 percent). Agriculture employed about 42 million people, and some 32.99 percent of them were unpaid workers.

The unbalanced growth rate of manpower and job and business opportunities as well as economic growth caused unemployment. Open unemployment in 2002 numbered eight million people, and the figure increased to 9.5 million people in 2003, with some 59.68 percent of them was of lower level education and the remaining 40.32 percent of higher level education. The total number of unemployment in 2004 is estimated at 10.8 million people.

Expansion and Development of Job and Business Opportunities

The main aims of the scheme are: to reduce unemployment and disguised unemployment through adding working hours in various business fields, both at rural and urban areas; and augment foreign exchange earnings through the sending of Indonesian workers abroad. Meanwhile, the goals of the scheme are: to expand job opportunities in various fields of business; to develop Indonesian workers who are qualified and capable; and to set up an excellent manpower information system.

The major activities of the scheme include: (1) to improve trainings with curriculum related to acknowledging efficient technology, entrepreneurship development, and other supporting skills and expertise in order to make the work force capable of creating job opportunities; (2) to prepare and disseminate information on job market; (3) to set up settlements for new inter-island migration to expand job opportunities in agriculture; and (4) to improve the mechanism of the sending, guidance and selection of Indonesian workers who want to work abroad, and seek out their protection.

In striving for the expansion and development of job and business opportunities, the Government in July 2004 launched a National Campaign for the Handling of Unemployment, which involved leading figures of central, provincial and district administrations, business representatives and representatives from higher learning institutions. The campaign aims to nurture sensibility and awareness of government apparatus and members of society to seek a solution to overcome the growing unemployment.

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Under the campaign scheme, in 2003 there were 4,344 job seekers employed under the placement program of Professional Independent Young Manpower (PIYM)/Volunteer Manpower (VM), 4,930 job seekers under the placement program of Educated Independent Manpower (EIM), 4,885 job seekers under the labor-intensive scheme, 8,419 job seekers under Expanded Labor-Intensive scheme, 98,602 job seekers under scheme of Inter-regional Manpower Placement (IrMP), Local Manpower Placement (LMP), and of Special Manpower Placement (InMP), as well as another 293,867 workers getting jobs abroad. The number of job seekers placement in 2003 showed an increasing trend compared to that of 2002. Up to May 2004, the number of job seekers getting placement under the scheme of PIYM/VM was 210, under EIM scheme 248, under labor-intensive scheme 457, under expanded labor-intensive scheme 1,300, and under schemes of IrMP, LMP and InMP 9,883, and the placement of Indonesian workers abroad totaled 18,753.

Improvement of Quality and Productivity Scheme

The scheme is aimed at encouraging, popularizing, and improving trainings and all aspects that affect productivity enhancement. The chief target of this scheme is the availability of work force having good quality, high productivity and high competitive edge both in domestic and international market.

The main activities under the scheme include: the development of competency standardization and certification done through the formation of an institution dealing with competency standardization and certification; the betterment of relevancy, quality, and efficiency of the job-trainings organized by the Government as well as private institutions; and the promotion of the system and method of productivity improvement.

Under the scheme, in 2003 there had been 14,800 people consisting of job seekers, employees, social workers, leading figures of communities and non-government organizations, attending institutional trainings and 20,485 people of the same professions attending non-institutional trainings; 1,088 people undergoing training for on-the-job-training abroad and 2,183 people undergoing apprenticeship abroad; 1,225 people undergoing training of trainers; 2,764 people taking part in entrepreneurship training. Up to May 2004, there were 1,993 people undergoing institutional trainings, and 2,521 people undergoing non-institutional trainings; 171 people undergoing job-trainings at home, and 171 people undergoing on the job-training abroad; 258 undergoing training for trainers; 820 persons attending entrepreneurship trainings and 123 persons attending training on institutional productivity development.

Up to April 2004 there had been 167 institutions organizing training for workers who wanted to work overseas. The number of Indonesian workers who had overseas placement from January up to May 2004 was 106,499. During the past three years the number of Indonesian workers who had been placed overseas totaled 1,069,406, some 75.38 percent of them working in non-formal sector and the remaining in formal economic activities. The sending of Indonesian workers to the Middle East countries had been handled by 171 service companies and to Asia-Pacific region by 233 service companies.

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Industrial Relations

There is a program designed to maintain a working and business tranquility in order to create harmonious relations between employees and employers that in turn will improve the welfare of employees and their families. This program is aimed at improving labor institutions in companies, enhancing working conditions, and healthy vocational security.

The main activities of the program are: to promote industrial relations and labor protection in order to encourage the formation of labor institutions in companies; to improve vocational safety and health, and social security for improvement of labors welfare; to enhance protection, control, and law enforcement of regulations imposed on labors; to improve obedience over the implementation of regulations on labors; to follow up various regulations of the ILO Convention on Labor Protection, which has been ratified.

Under this scheme, in 2003 there were 14,630 persons attending training courses on Communications, Information and Education (CIE), 3,200 persons taking trainings on Manpower Institutional Development (MID), 22,530 persons having guidance on Job Requirements and Labor Welfare (JRLW), 1,745 persons on Employment Protection and Industrial Relations Control (EPIRC). In addition, some 160 cases of industrial disputes and lay-off were settled; company regulations for 36,210 enterprises were drawn; and 9,102 cooperation agreements were made. Also done under the scheme were the 14.76-percent increase of regional minimum wages and provision of Employees Social Security (locally known as Jamsostek) to 20.16 million workers working in 102,821 companies.

In 2004 (up to May 2004) there were 866 persons attending training courses on CIE; 1,876 persons taking training courses on MID, along with the settlement of industrial disputes and lay-off for 1,207 workers; the settlement of 63 cases of labor strikes and protests; the arrangements of company regulations for 36,269 enterprises; the composition of 9,118 joint cooperation agreements; and the 10.8-percent increase of regional minimum wages.

In the context of dealing with all matters of Indonesians working abroad particularly in Malaysia and Saudi Arabia, and in helping them when they have problems involving legal cases, three Government Officials (attaches) have been currently commissioned and posted in those countries. More similar attaches will be commissioned and posted in other countries such as Singapore, Hong Kong, South Korea, Kuwait, and Taiwan.

So far memorandums of understanding (MoU) on the placement of Indonesian workers have been agreed and signed with Jordan (in 1996) and with Malaysia (in 2004). Similar MoUs with other countries such as Syria, Qatar, South Korea, Brunei Darussalam, and Taiwan are still under preparation.

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Social Security

Social security, as stipulated by the nation's Constitution, Article 28H clause (2), is the citizen's basic right. Further, the Constitution, through Article 34 clause (2), states that "the State shall develop a social security system for the whole Indonesian people…" Meanwhile, the International Labor Organization's Convention No. 102 of 1952 recommends all countries to provide protection to every worker. Parallel with this, the People's Consultative Assembly of the Republic of Indonesia, during its 2001 Annual Session commissioned the President of the Republic of Indonesia to establish a National Social Security System in the framework of granting the labor force a comprehensive and integrated social security.

This social security is necessary in protecting individual workers, their family members, as well as the communities from emergency conditions caused by among other things famine, natural disaster, accidents and social unrest that might disturb the people's earnings and supplies of foods.

Although still short of covering the communities, there has been a scheme locally known as Jamsostek. It is a social security scheme for employed workers. The operator of this social security scheme has been asked to expand its services, such as to provide its members with down-payment for credit of house mortgage, to build public facilities for religious houses of worship, for sports etc, and allowances for celebrating religious commemorations.

Social Insurance Scheme

Scheme of social insurance, which are funded by individuals and companies, are designed to protect members and their families from unfavorable situations such as lay-off, work accidents, sick, and death. The schemes are also aimed at covering more and more number of people being protected by social insurance schemes.

In dealing with all social risks arising during the employment of Indonesian workers overseas or during preparation for the overseas placement at home, there has been arranged a scheme that will protect Indonesian workers working abroad through an insurance scheme pursuant to Decision of Minister for Manpower and Transmigration No. 157 of 2003. The insurance scheme consists of three kinds of programs such as : a) pre-placement program that secures insurance on death, maximum treatment, permanent deformity, and accident; b) on-going placement program that covers insurance on out- and in-work accident, sick treatment, death due to accident or sick, including the cost of burial/sending a corpse to his/her native hometown, unpaid wage, and lay-off ; and c) post-placement program that embraces insurance on death due to accident, and total paralysis caused by accident.

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Global Trend

Liberalization of global trade will pose a tight competition among workers of all countries since it allows the traffic of workers from one country to another much more rapidly. It also will require professional workers, the criteria of which are set forth by developed countries. In facing this situation, it is time for Indonesian workers to adjust themselves to the criteria on each profession to be able to compete with professionals from other countries to fill in vacancies at domestic and international market. This is in line with Law No.13 of 2003, which stipulates among other things the improvement of Indonesian worker's ability and self-capacity to compete, and the utilization of expatriates.

Some professions the Indonesian workers have claimed international reputation for are among other things accountancy, oil drilling, construction, seamanship, nursing, and midwifery.

TOURISM

Tourism industry in Indonesia has placed itself as an important economic sector in speeding up the national sustainable development, though this sector was in fact put into the Guidelines of State Policy only in 1978 or during the implementation of the Second Five-Year Development Plan. Foreign exchange the industry had brought in proved swelling from one year to another to turn much more significant contribution to the economy. This has been in parallel with the industry's expanding contribution to the opening of business opportunities to accommodate more and more labors to work in.

In dealing with such tourist industrial development, various policies, measures and steps necessary have been introduced, put into practice and implemented appropriately to the developments of the industry. Having been regarded as a cultural based development activity during its initial stage, the industry later on has turned to be one of important economic sectors of foreign exchange earner.

However, it has been proved that the policy which stresses more on foreign exchange drive has gained, in one hand, much more foreign exchange earnings, but on the other hand has caused rather unfavorable impact to natural resources and culture. Thus, as of 1999 tourism concept has been regarded as part of socio-cultural development program. The 1999-2004 Guidelines of State Policy affirms that tourism industry needs to be developed through a comprehensive and integrated approach system, inter-discipline and participative in character, by using economic, technical, agronomic, socio-cultural, energy thrifty, natural resource preservative and environment friendly criteria. Furthermore, relevant regulations ascertain that tourism development should be based on the potency of socio-cultural diversity, arts, and natural beauties. The development should certainly take into account the aspects of good governance, decentralization, human resources and community-based tourism development.

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Matras beach in Bangka Island, Bangka-Belitung Province

The long-term goals of tourism development are: sustainable development of national tourism industry; and Indonesia as a comfortable, attractive tourist destination having high competitive edge, with its natural beauties and culture to rely on. While the short-term target is the recovery of the country's tourism image in international market. The country's image was plunged to negative due to terrorist attacks in Kuta, Bali, and to the J.M. Marriott, as well as the latest attack in Kuningan area both in Jakarta.

Targets to be achieved in the field of tourism industry in 2004 are, among other things, the 7-percent to 10-percent growth of foreign arrivals and the 1.9 percent growth of domestic tourists; foreign exchange earning of US$7.6 billion at the end of 2004, and domestic tourists' expenses of Rp16.97 trillion.

In relation with the targets to achieve, it certainly should strive to make the products of tourism industry more improved, both in term of quality and quantity, that in turn they would offer more contribution to the expansion of job opportunities and improvement of community's income. In addition, it also strives to lure more domestic as well as foreign tourists to outer islands of Java and Bali.

In connection with efforts to lure more tourists, domestic and foreign ones, promotional schemes and marketing's have been launched. To encourage domestic tourism promotion it has been launched the "Gebyar Wisata Nusantara" (Archipelago Tourism Glitter) scheme with the theme: "Come on Exploring the Archipelago". For overseas promotional scheme, the new theme is: "Indonesia, Ultimate in Diversity", by promoting Indonesia as the most varied destination anywhere'. Promotional marketing has been done not only through participation in various tourism bourses at home and overseas (the International Tourism-Milan Bourse, the International Tourism Bourse-ITB Berlin, etc), but also through advertisement via mass-media, including world's well known TV stations such as CNN, CNBC, and BBC and world's leading magazines such as the Time Asia, TTG Asia, Travel Weekly East etc., and other promotional forms.

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Visa Policy

As of February 1, 2004 Indonesia has started implementing the Visa-on-Arrival (VoA) policy. The Pay-on-Arrival Visa is required of visitors from 21 countries. These countries are the United States, Argentina, Australia, Brazil, Britain, Canada, Denmark, Finland, France, Germany, Hungary, Italy, Japan, New Zealand, Norway, Poland, South Africa, South Korea, Switzerland, the United Arab Emirate, and Taiwan. While tourists from countries offering visa-free facilities to Indonesians, such as Thailand, Malaysia, Singapore, Brunei Darussalam, the Philippines, Hong Kong Special Administrative Region, Macao Special Administrative Region, Chile, Morocco, Peru, and Vietnam, remain to enjoy a reciprocal policy by the Indonesian Government.

The new policy also shortens the length of stay of tourists able to continue availing of the free-visa facility from 60 days to 30 days. The new pay-on-arrival visa allows visitors to stay for 30 days. A foreign tourist has to pay US$25 for a 30-day visit and just US$10 for a three-day visit.

Overseas Cooperation

In promoting tourism industry, the Government has endeavored various efforts, including maintaining cooperation with other governments such as in sub-regional cooperation, namely the Indonesia-Malaysia Singapore Growth Triangle (IM-GT), the Indonesia Malaysia-Thailand Growth Triangle (IMT-GT), Brunei Darussalam-Indonesia Malaysia-the Philippine-East ASEAN Growth Area, and bilateral cooperation among other things with Japan, Thailand, Algeria, Tajikistan, and Poland, as well as with world organizations such as the UN-ESCAP, WTO, UNICEF, UNESCO, ASEAN and APEC, Tourism Working Group and Japan ASEAN Centre.

In its role within the international fora, Indonesia has been appointed as member of Executive Council of the World's Tourism Organization (WTO) for the period of 2003-2007, and member of Committee for the WTO's 2003-2005 Program. The appointment was made during the 15th WTO Meeting held in Beijing in October 2003. During the meeting it was also designated Prof DR. Emil Salim of Indonesia as member of the world committee on Tourism Ethics.

Foreign Arrivals

The number of foreign tourists visiting Indonesia in 2003 was only 4.428 million, decreasing by 12.02 percent from that of 2002, which totaled 5.03 million. The decrease of the number was followed by the reduce of their length of stay from 9.79 days in 2002 to 9.69 days in 2003. The shrink of tourists' number and their length of stay had in fact diminished the earning of foreign exchange from US$4.3 billion in 2002 to US$4.0 billion in 2003.

In June 2004 the number of foreign arrivals reached 407.9 thousand, growing by 10.51 percent compared to that of previous month, which numbered 369.1 thousand. At the

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same time, the number of foreign tourists visiting Bali noted a growing trend from 123.0 thousand in May 2004 to 137.3 thousand in June 2004. Cumulatively, the number of foreign tourists visiting Indonesia during the first quarter of 2004 was 2.13 million, increasing by 34.64 percent compared to that of the corresponding period in 2003.

CULTURE

Policy

Policy in the field of culture aims to among other things enhance the people's awareness on the importance of preserving each local culture, within the frame of national unity, in the form of national culture suitable with the motto `Unity in Diversity'. It is also designed to more preserve the national cultural values through efforts of revelation, study, and nurture of traditional values, customs, and believe in One and Only God existing and developing in respective tribes or ethnic groups, so that they can be a reference in the life of society, nation and state, particularly for younger generation through the channel of non-formal (family and community) education, formal education, and mass-media. Besides, pride and respect towards our national cultural nobility be more nurtured to strengthen the nation's self esteem.

Various measures have been taken in the context of among other things improving the performance of national film industry as part of culture, and enhancing the community's appreciation to the national film products; developing the national Indonesian language and local languages and promoting the use of the Indonesian language and local languages properly and well; writing and nurturing historical values and heroism to build nationality and spirit of patriotism, particularly for younger generation; and protecting, safeguarding, caring, conserving and renovating historical sites and objects spread throughout the country, including that of underwater archaeology, etc.

Cultural remains

The country is stunningly rich in kinds of arts and craft. Skill and creativity of Balinese artisans have been popular worldwide. So have craftsmen and artisans of woodcarving from Jepara, Central Java and West Sumatra, cloth weaving from East Nusa Tenggara and Palembang, batik cloth from Solo (Central Java), Yogyakarta, Cirebon (West Java), Pekalongan (Central Java), Madura (East Java) etc. In many places in the country, artistry has been a daily life. For instance, a mere simplest household item, usually made of bamboo or rattan, is plaited artistically and decorated with patterns inherited from one generation to another.

Music

Gamelan is a music instrument having been so popular and reaching a sublime degree in Java and Bali. Nowadays, this kind of music has been well known in almost entire Indonesia. Word of Gamelan is derived from Javanese word `gamel' meaning "to beat." The gamelan orchestra generally composes of xylophones of bronze or copper bars

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suspended over bamboo, wood or metal resonators. A complete gamelan outfit consists of two sets of ensembles, each tuned to a different tone system.

In addition to gamelan there are gambus, a music instrument in the form of guitar but more narrowed; kecapi, Indonesian style zitar, popular among Sundanese (West Java). Usually this kecapi is accompanied by bamboo flute, to make kecapi-suling with rather melancholic resonance; angklung, traditional music instrument made of bamboo popular in many places in the country.

Puppet show

The word wayang derives from the Javanese word meaning bayangan in the Indonesia language or shadow in English. In Central and East Java and Bali, puppet show is a shadow show to which onlookers watch the shadow of puppets, made of leather, manipulated by a narrator while narrating a story. In West Java, puppets are made of wood, and the local people name them "golek," "golek" show.

Puppet show is usually played during the night, almost the whole night. Through TV, puppet show time usually is shortened to a half to one hour only. The story of the show is usually culled from Hindu epics Ramayana and Mahabrata. In addition to these puppet shows, there is also wayang wong which is played by a number of dancers.

Indonesians were puffed up with pride when in November 2003 the UNESCO, one of the UN organizations, recognized and appointed puppet show as the World Master Piece of Oral and Intangible Heritage of Humanity.

Dances

Many regions of the country have their own dances. The dances are believed to originate from either religious rituals or have been developed for presentation at special occasions, such as in welcoming guests or visitors. Among those dances acclaiming popularity among the people are: tanggai dance of South Sumatra, mask dance of Jakarta and Cirebon (West Java), remong dance of East Java, saman dance of Aceh, piring dance of West Sumatra, etc. Meanwhile, the best known war dances include baris dance from Bali, beksa lawung dance from Yogyakarta, negejiak and kantet from Kalimantan, seudati agam from Aceh, and cakalele from North Sulawesi.

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Betawi modern dance

Carvings

Using various materials such as wood, ivory, and bone, the art of carving and sculpting has always been the artistic heritage of Indonesians. Jepara (Central Java) and Bali are the hubs of the woodcarver's art. However, unlike Jepara's art, which typically adopts rather traditional patterns for the ornamentation of objects, Balinese carvers and sculptors often tend to follow innovative and creative spirit of the people. Less popular but not of mediocre degree are the carvings of some regions including West Sumatra and Tana Toraja (South Sulawesi). While rather "primitive" art pattern of Asmat people in Papua have been famous the world over. The centers of leather art are Solo (Central Java) and Yogyakarta.

Traditional Weaving

Indonesia is one of the world's leading traditional textiles producers. The skills to produce the traditional textiles have been going down from one generation to another within thousands of years. Some of the most beautiful and highly artistic cloths are the work of even simple village throughout the country.

In the past, many of the traditional cloths were attributed to magical properties and in some occasions still are and were used in the various rites related to the important milestones in the human life cycle, such as birth, adulthood and death.

Of the country's best known traditional textiles are the ikat cloths of several regions, the batik of Java, the songket or Saji textiles of South Sumatra, ulos cloths of Batak, North Sumatra, and lurik of Solo (Central Java) and Yogyakarta.

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Producing exquisite "songket" cloth in South Sumatra

POLITICAL AFFAIRS

DOMESTIC AFFAIRS

Pursuant to the 1999-2004 Guidelines of State Policy and the National Development Programs in the field of Domestic Politics, development of domestic politics aims to strengthen and maintain the existence of the unitary state of the Republic of Indonesia based on the motto of unity in diversity; to perfect the 1945 Constitution to keep abreast with the needs of the nation, dynamism and reformation by remaining to nurture the national unity and integrity in accordance with the soul and spirit imbued in the Preamble to the 1945 Constitution; to improve the role of legislative bodies and higher state institutions by asserting each function, authorities, responsibilities which refer to separation of power and clear relationship order among executive, legislative and judicative bodies; and to promote national political system that is more open and democratic, maximize control over the performance of state institutions, improve effectiveness, function, and participation of social organizations, professional groups, and NGOs in the state life. To that end there have been four major schemes to be and to some extent have been implemented, namely the Political Structure Improvement Scheme, the Political Process Quality Improvement Scheme, and the Political Culture Development Scheme.

Political Structure Improvement Scheme

The main aims of this scheme are: to make the Constitution comply with the dynamism of the national political life and aspirations of the public as well as development of international environments; to encourage political institutions to practice democratic

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principles; and to encourage the neutrality of civil servants and personnel of the Armed Forces (TNI) and the Police, and to make the sound application of it.

The scheme is also designed for the formation of a democratic political structure, which separates power of state, and the creation of improved capacity of state institutions in executing their respective role, and task as well as the mechanism of check-and-balance. But the ultimate goal of this scheme is the strengthening and maintenance of the Unitary State of the Republic of Indonesia.

Major changes the nation has had currently are marked by: amendments of the Constitution that changes substantially some previous consensuses in governing the nation and state life; formation of new political format with the operation of new law on political matters, general elections and composition and status of the People' Consultative Assembly and the House of Representatives; the formation of new format of relationship between central and regional and local administrations, which is based on new regional autonomous law; the agreed consensus on new format on civil-military relationship, and relation between the Armed Forces and the Police based on decrees of the Assembly and laws on defense and security; the implementation of direct elections for president and vice-president as the Constitution mandates and relevant laws ask for; the agreement that ends the existence of appointed representatives from the Armed Forces and the Police in legislative bodies; national consensus on neutral stance of state institutions and the Armed Forces and the Police as regard political affairs; and agreed consensus on the need for a special and independent institutional umbrella in eradicating corruption.

An important development worth noting in political life is the organization of general elections by an independent institution, the General Elections Commission (KPU) that more or less has proved itself capable of organizing the 2004 general elections on the principles of honesty, independency, freedom and fairness

Also worth noting is the formation of Constitutional Court, an important legal institution functioning to do judicial reviews on legal products against the Constitution. The Court is expected to produce a breakthrough in legal affairs, capable of reforming political life, including things that promote the development of civil society which is tolerant and anti-discrimination.

The introduction of bicameral system in the nation's parliament it certainly requires appropriate adjustment itself is to create a parliament that can accommodate more balanced political aspirations and representation between those of national and local levels, and maintain internal check-and-balance system to avoid excessive hegemony in the parliament. In this context it is understandable that all aspects related to the check-and-balance among state institutions, are improved, stressing on the empowerment of the role and position of the Regional Representatives Council.

Appropriate attention has been given to regional autonomy and the institutionalization of the National Reconciliation and Truth Commission (NRTC) for the creation of a more

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peaceful and just political culture to reinforce the foundation of national unity and integrity.

Regarding the NRTC, the institutionalized reconciliation underlines the settlement of political bickering and conflicts in the past with the main aim to create a peaceful and sound political climate in order that the nation's energy is concentrating on building the nation a better future.

Political Process Quality Improvement Scheme

The main aims of the scheme are to develop national political system which is democratic and open; to build the life of political parties, which respect differences of political aspirations and notions; and to promote a democratic system of general elections and the application of it by improving related statutory regulations. The scheme is directed towards political parties' improved independency, particularly in struggling for popular aspirations and interests, and political parties' function to control effectively the performance of state institutions as well as to promote effectiveness, function and participation of social organizations, professional groups, and non-governmental organizations in the life of state. It is also the ideal of the scheme to organize general elections in a more well-organized fashion with maximum participation of eligible voters, and in democratic, direct, general, free, secret, honest, fair and civilized ways, by an independent and non-partisan organizing body.

In consequence of the effective laws on general elections, political parties and recruitment of state officials, political process in quality term has undergone relatively drastic changes. In the year 2004 the Indonesian nation for the first time elected directly its President and Vice-President, as well as all members of legislature (the People's Consultative Assembly, House of Representatives, and Regional Houses of Representatives). The nation may claim having organized the most complicated general elections system with numerous eligible voters scattering at a very large territory consisting of thousands of islands and islets, to elect members of the regional or local Houses of Representatives, members of the national House of Representatives and members of the Regional Representatives Council in a single year. Members of the House of Representatives and the Regional Representatives Council constitute members of the People's Consultative Assembly that has become being a bicameral. Another important change in the membership of legislature worth noting is the exclusion of appointed representatives from the Armed Forces and the Police as of 2004.

The multiparty system regained in 1999, and new, well-rooted political parties adopting fairly modern conceptions emerged to compete with primordial parties which in the future are expected to be no more dominating the country's political spectrum. The life of political parties, including the process of their alliance, coalition, compromise and consensus among them, has been apparently undergoing the process of rationalization. Parallel with the growing critical and intelligent people, the relation between political parties and the mass has been apparently oriented to the implementation of vision and mission as well as programs, and less focusing on ism, religion and ideology.

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Institutions having been established to improve the political process such as the Constitutional Court, the Judicial Commission, the General Elections Commission, and the General Elections Supervision have already played their respective roles in preparing general elections, settling disputes on the result of votes counting, and supervising the implementation of the general elections. At the grassroots level a number of organizations came into being as the watchdogs over the political process occurring so intense particularly in 2004. All of them have reduced substantially the role of Government participation in preparing, executing and supervising the 2004 general elections.

Hard work by those institutions and active participation of the public in making the general elections successful have been good signs that political reform has been in the right track. The process of political recruitment tends to be on rational considerations rather than on emotional ones. Thus, in encouraging this tendency a mechanism of public debates is in fact imperative to be given ample room and promoted to allow the public to know more and even examine critically the eligibility of the vision, mission, and programs a candidate of public leader or parliamentarian can envisage and offer. The fit and proper test method practiced currently by the House of Representatives to select a candidate nominated to hold an important public post has been a good way to gauge a credible leader; and it needs to be applied more widely to candidates for secondary and even tertiary posts, in a more credible and transparent ways.

Promoting civic education containing modern political education along with improving schooling curriculum containing cultural matters, including cultural values, the values of democracy, human rights and political ethics are imperative to be sought out to educate Indonesians of younger age to understand and respect the high values of political ethics and egalitarianism, things that democracy nurtures.

Things still need to be promoted; encouraged and facilitated are the holding of socio-political forums and discussions for which the mass-media can play a key role, the cultivation of the importance of respecting differences of opinions, and simultaneously discouraging discrimination. Freedom of the press in this matter is decisive to nurture more sound and democratic political process.

Political Culture Development Scheme

The scheme is aimed at improving political education in more intense and comprehensive ways to make political culture more democratic, the differences of opinion respected, legal supremacy and human rights upheld pursuant to what the 1945 Constitution stipulates; popularizing and practicing the principles of equality and anti-discrimination in the life of society, nation and state; promoting nation-and-character building towards a more modern, unified, peaceful, democratic, dynamic, tolerant, prosperous and just Indonesian nation.

Amendments to the 1945 Constitution, the effectiveness of new laws on political field, no more appointed representatives from the Armed Forces and the Police in legislative

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bodies, and the implementation of regional autonomy or decentralization have been the real evidences of the reform of the country's political culture through democratic processes. More over, the public have been apparently more mature and critical in understanding the existing political conditions and in controlling the management of the state administration.

Those encouraging trends are hopefully leading to the materialization of social transformation that preserves noble values of tolerant behavior, national unity, anti-discrimination, and human rights.

Foreign AFFAIRS

As the 1945 Constitution stipulates, the aim of the country's foreign policy is to strive for a meaningful contribution for the creation of the world that is peaceful, free, and socially just. For this, it is Indonesia's commitment and principle to continuously improve multilateralism, particularly by reinforcing and improving the system of the United Nations Organization.

In diplomatic front, Indonesia has tried hard to revive its foreign politics by remaining to adopt a free and active foreign policy. This is pursuant to what the 1999-2004 Guidelines of State Policy says, among other things that: the direction of foreign politics, which is free and active, is national interest orienting; stressing solidarity among developing countries; helping the nations' struggles for their independence; refusing colonialism in its all forms; improving the nations' help-capacity, and maintaining international cooperation's for the people's welfare.

It is also stated by the state policy that the quality of diplomacy should be more improved in order to help speed up economic recovery and development activities, through regional and international economic cooperation in the context of improving regional stability, cooperation and development drives. It is also underlined that the country's preparations in all fields boosted to face the world free trade, particularly in approaching the working of the AFTA, APEC and WTO. In addition, it is also sought out to broaden agreement of extradition with friendly countries, and to enhance cooperation in all fields with some neighboring countries, and cooperation under the ASEAN region to maintain regional stability, development, and improve welfare.

Policy

The country's free and active foreign policy aims to bilateral, regional and international levels, in the context of speeding up the recovery of the nation's and country's dignity and trust of foreign governments, including institutional creditors and investors towards the Indonesian Government. Policy of bilateral relations covers the fields such as political security, economy, trade, tourism, socio-culture, and inter-community.

Bilateral relations in political and security fields focus on matters of protecting Indonesians citizens and workers abroad under the umbrella of law and diplomacy; on

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fencing the whole territory of Indonesia in the legal and political sense through border diplomatic activities (the implementation of foreign policy) in the context of settling any borderline dispute and the management of state borders with all participation of the people living near the border lines; guarding the territory from any foreign interference that can worsen the tendency of disintegration; fighting inter-state crimes through among other things agreements of extradition with various countries such as what the country has done with Australia, the Philippines, and with Malaysia; improving bilateral military cooperation with several countries in the context of modernizing the country's military might, transferring of technology, diversifying armor system; enhancing law enforcement to help overcome national security problems particularly on separatist movement and terrorism such as that has done with Sweden on separatism of Aceh, and cooperation on the handling of related trans-national crimes.

Bilateral measures in the field of economy and trade aim to enhance bilateral relations in investment and trade between Indonesia and some key countries such as the US, concerning improvement of non-oil and gas export segment and investment in various sectors; with the European Union (EU), concerning the improvement of various programs pertaining to economic cooperation and technical assistance for trading activities; with Japan, regarding developments of various bilateral forums and agreements among other things Agreement on Investment Improvement; with Russia, on among other things the establishment and implementation of MOU on banking cooperation among commercial and central banks; and with East European countries on intensive trade diplomacy followed by efforts to build new agreements on economic and technical cooperation; with India, on balance-trade system and improvement of function of the two-country commissions; with the Central Asia on preliminary attempts on the application of balance-trade system to improve trade relations with countries of this region; and with Afghanistan on the reactivating of Indonesian representative office; as well as with the Middle East countries on the enhancement of economic relations, particularly expansion of market access to this region, simultaneously the improvement of investment of those countries to Indonesia,

Bilateral cooperation in tourism covers among other things the implementation of visa-free for short visits for 11 countries on reciprocal basis, with Chile and Peru for instance, and the visa-on-arrival constitutes efforts to combine tourism promotional interest and interest of national security, particularly in strengthening efforts to prevent and fight inter-state crime. The cooperation also embraces development of bilateral cooperation with several countries where the tourists come from, and provision of inputs periodically on security condition in Indonesia in order that the countries where tourists come from, particularly the US, Britain, and Australia, review their travel warning.

In socio-cultural front, the policy covers: improvement of educational and scientific cooperation with various friendly countries such as Australia, Japan, the US etc, through the establishment of joint-working groups; organization of cultural and tourism road-shows in a more integrated and well-planned ways in several countries; provision of facilities for international conventions and visiting-exchange programs for foreign editors ad chief-editors of noted newspapers to boost mass-media promotion in the context of

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maintaining the nation's positive image. It also includes the offering of one-year-non-degree travel scholarships to post-graduate scholarships, and the sending of Islamic preachers and Qoranic recites in the context of providing clear and true description on Islamic development in Indonesia.

Regional policy covers measures on the ASEAN, APEC, the Pacific Island Forum (PIF), the Southwest Pacific Dialogue (SwPD), the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC), and on Middle East.

Regarding the ASEAN, Indonesia, among other things, directs ASEAN cooperation to the establishment of an ASEAN Community consisting of the ASEAN Security Community, the ASEAN Economic Community, and the ASEAN Socio-Cultural Community to create a peaceful, stable and prosperous Southeast Asian region. Indonesia also promotes ASEAN cooperation improvement in fighting against inter-state crime, handling natural calamity and infectious diseases as the implementation of the ASEAN Security Community. At the regional level, Indonesia acts as the coordinator for the ASEAN Disease Surveillance Net. Indonesia continues endeavoring the achievement of ASEAN economic integration (by realizing the sole market and production base as contained in the ASEAN's Vision 2020) going towards the ASEAN Economic Community. The country also makes efforts to improve ASEAN relations with dialogue partners such as ASEAN-China, ASEAN-Japan, ASEAN-Republic of Korea, ASEAN+3, ASEAN-the US, ASEAN-Australia, ASEAN-India etc. In addition, Indonesia underpins the building process of a mechanism of the regional ASEAN Human Right based on step by step building blocks approach.

During the 37th ASEAN Ministerial Meeting held in July 2004, Indonesia received a mandate to formulate a plan of action for the ASEAN Security Community that will be put forward in the ASEAN Summit in November 2004.

Concerning its policy in the APEC, Indonesia continuously pursues the creation of a more fair multilateral trade system and a more open economic regionalism. The same effort has been sought to make the APEC remain paying more attention on the permanent institution and programs focusing on economic issues by offering fair balance between: Liberalization and Trade Facilities; Liberalization and Investment Facilities; and Technical Cooperation and Economy.

On account of the European Community, Indonesia keeps endeavoring that the expansion of the European Community does offer opportunities for political, economic, and socio-cultural relations improvement to both parties.

Various measures covering efforts to improve participation, cooperation, and support in, by and for various regional organizations and fora such as the Pacific Islands Forum, the Southwest Pacific Dialogue, Indian Ocean Rim Association for Regional Cooperation (LOR-ARC), AASROC, etc, continues to be sought for by Indonesia for common interest in various fields.

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In Palestine issue, Indonesia keeps on supporting the struggle of the Palestine nation as what the UN-Security Council's Resolution No. 242 (1967) and No, 338 (1973) demand unconditional return of all Arab territories occupied by Israel, and recognition over the rights of the Palestine people to determine their own fate to establish their state on their own land, and the principle of land for peace. Indonesia also supports peace initiatives under the Madrid Peace Conference (1991), Oslo Peace Conference (1993), Sham Al Sheikh Peace Conference (1999), and the latest Road Map, which has been initiated by the US, Russia, the UN and the European Union.

On Iraq issue, Indonesia gives support to the leading role by the UN in the process of reconstruction, security recovery, and the promotion of a new legitimated representative administration in Iraq.

While concerning its multilateral policy, Indonesia has a strong commitment to improve multilateral cooperation in responding to global opportunities and hurdles in political, economic, developmental, environmental, and socio-cultural fields. This is based on a reality that multilateral cooperation places all nations as equal by still respecting their sovereignty, and decision making process that involves participation of all members.

General policy of the Republic of Indonesia on its membership in multilateral organizations is among other things: to make its membership advantages in multilateral organizations optimum for the interest of national development, through technical assistance and cooperation, including financial assistance; to step up, in quality and quantity, Indonesia's representatives in various committees and commissions as well as other international agencies in order to struggle for national interest, and at the same time to encourage active participation of Indonesia in various multilateral fora. It is worth noting that Indonesia is a member of multilateral fora such as the UN, WTO, Non-Align Movement, Group 77, OIC, etc.

Regarding the UN, Indonesia keeps on pursuing for restructurization of system and function of the UN's main bodies such as the General Assembly, the Security Council, and the International Court, the Economic, Socio-Cultural Council, Secretary-General and other organizations of the UN. Indonesia seeks out expansion of permanent and non-permanent members of the Security Council, and proposes that the use of veto rights to be completely abolished.

On the WTO, Indonesia is eager that the trade liberalization process accommodates fairly the interests of developing countries and developed countries, particularly on access for products of the developing countries to the developed countries. Together with other developing countries, Indonesia strives for food security and rural development interests being accommodated through, among other things, the receipt of Special Product (SP) and Special Safeguard Mechanism (SSM) concepts as an integral part of agricultural advanced liberalization.

Concerning the Non-Aligned Movement, Indonesia makes efforts, among other things, that through this Movement various problems faced by the developing countries can be

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settled. Those problems include international trade, finance, investment and monetary, foreign debt, and food security.

The country's policy on the Group-77 is to endeavor that the group capable of improving its members' bargaining position in dealing with the developed countries upon economic, social, and developmental issues, particularly in the frame work of the UN.

In relation with the OIC, Indonesia tries among other things to enhance the organization's performance to make it a relevant and effective means to contribute to the settlement of problems faced by its members, and to seek for improvement of economic and financial cooperation as well as of trade among the organization's member countries.

The country's policy on the Group-15 is among other things to try to manage, through this Group, economic and technical cooperation such as in investment, trade and human resources development.

While on the Developing-8, Indonesia strives to make cooperation among member countries of the Group improving more through exchange of experience schemes, and inter-D8 trade cooperation.

The Bali Concord II

During the 9th ASEAN Summit meeting held in Bali, Indonesia, on October 7-8, 2003, the leaders of the 10-member grouping signed the Declaration of the Bali Concord II, to reaffirm that ASEAN is the

grouping of the Asian Southeast nations, bonded together in partnership in dynamic development and in a Community of Caring Societies Committed to upholding cultural diversity and social harmony.

By the Concord II it is agreed that in achieving the ASEAN community objective before 2020, it should be supported by three pillars of cooperation, namely political and security cooperation, economic cooperation, and socio-cultural cooperation that are closely intertwined and mutually reinforcing for ensuring lasting peace, stability and shared prosperity in the region

For that purpose, it is also agreed to adopt frameworks for the establishment of the ASEAN Security Community (ASC), the ASEAN Economic Community (AEC) and the ASEAN Socio-Cultural Community (ASCC).

The leaders of the ASEAN unanimously agreed the ASEAN Security Community for the concept is envisaged to be able to bring ASEAN's political and security cooperation to a higher plane to ensure that countries in the region live at peace with one another in a just, democratic and harmonious environment. They agreed that they regard their security as fundamentally linked to that of other members and bound by geographic location, common vision and objectives.

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It is stressed that the ASC subscribes to the principle of comprehensive security as having broad political, economic, social and cultural aspects in consonance with the ASEAN Vision 2020, rather than to a defense pact, military alliance or a joint foreign policy. It recognizes the sovereign right of the member countries to pursue their individual foreign policies and defense arrangements and taking into account the strong interconnections among political, economic and social realities.

The ASC has a view to reinforce national and regional capacities to flight against and deter terrorism and transnational crime. In addition, the ASC shall work to ensure that the Southeast Asian region shall remain free of all weapons of mass destruction. The ASEAN leaders affirmed the importance of the ASC to have capacities and responsibilities as the key mover of the ASEAN Regional Forum (ARF).

INFORMATION, COMMUNICTIONS AND MASS-MEDIA

The 1999-2004 Guidelines of State Policy underlines that the development of information, communications and the mass-media should focus on the improved use of information through modern and traditional mass media to educate the people, on the strengthening of unity and integrity of the nation, cultivating national identity and secured right to use information and communications means and infrastructures, improved quality of communications in various fields through the mastering and application of information and communications technology in order to strengthen the nation's competitive edge in facing global challenges, the enhanced role of the press in line with the improvement of the journalists' welfare, legal supremacy, and human rights.

Communications, information and the mass-media have been playing an important role either in determining possible success of the democratic political system or in advancing the intellectual life of the nation. Therefore, in relation with this, various action plans have been made and carried out to develop, promote and advance the communications-information-mass media-related matters. They include the introduction of: information, communications and mass-media development program; program for improving infrastructures of broadcasting, information, communications and the mass media; and improved quality of development information services program.

Information, Communications, and Mass Media Development program

The main aims of the program are to encourage and improve information exchanges, and communications among individuals and community groups and between the government institutions and the communities in conformities with their respective role and function. What the program does want to achieve are the creation of the public's political awareness and maturity through the formation of information flows and exchanges in free and transparent ways, and the availability of more open political control.

Current trends of information and communications technological advancements have indeed brought about on one hand significant changes in the lives of the public in political, economic, socio-cultural and defense and security aspects. Mass media

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industries, electronic and printed ones, on another hand have already got improved and ample freedom to perform their social and political control. However, the industries as a matter of fact still need to better their professionalism. The mixture of the advancement of information technology and freedom of the press has in turn a great potentiality to encourage firmly the process of democratization.

The developments which have already encouraged the function of the mass media run as they should are the introduction of related regulations that secure legal basis for the operation of the mass media, and simultaneously protect the public from any negative impacts the mass media might cause. The regulations concerned include Law No.32 of 2002 on Broadcasting, and even the Bill on the Freedom of Access to Obtain Public Information. The expected outcomes from the secured legal certainty are the guarantees that the public have the right to get information they wish to know or more popularly known as the right to know, and the Government's obligation to disseminate information the public may want to know or more popularly as known as the obligation to tell, in conformity with the development of democratic life of the state and nation.

More encouraging are the issuances of directives on Broadcasting Ethical Conducts and Standards of Broadcasting Materials or Contents by the Indonesian Broadcasting Commission, and of the manual on Indonesian Television Ethical Conducts covering Television Broadcasting Ethical Standards and Broadcasting Business Standards prepared by the Indonesian Television Broadcasting Association. No less important is the establishment of such institutions such as the Television Watch that reflect the public concern over television programs in particular.

Developmental concepts of the community media empowerment have been made available in the context of realizing nation-wide networking of information, communications and the mass media. By the networks, the community media offer the public greater access to any information sources. Opportunities the communities may get to determine public tastes and demands are made much more ample by granting the communities chances to disseminating information considered important. Thanks to community media, all members of society may share equal access to information.

It is under the program that relevant studies have been taking place to produce data and information on overseas information system and on the utilization of new media communications or internet as new means of communications. The results of the studies constitute inputs for policy decision-making in developing overseas information service system and in utilizing new media as telecommunications means to disseminate information on government policies and measures.

Improved capacity and capability of the national information services in supplying and catering to information are indeed directed towards efforts to reduce disparity of information among the public. To this end a series of actions have been undertaken, including the arrangements of central-regional information model, inventories of community media, composing developmental concepts for media watch institutions, socialization of formulations of community media development, and composing concepts

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of professional rating standards for mass media contents. Along with them, it has been sought out to expand information and communication networks even up to remote areas, under the framework of improving infrastructures of information and telecommunications, and of the mass media, by providing the application of documentary management and data reporting, and guidance for government information service mapping.

Students seeking information via internet

Besides, there have been also related activities that put emphasis on the encouragement of the communication media to fulfill the needs for information, to endeavor equitable dissemination of information to all layers of society, and to build and develop institutions of information, communications, and the mass media. The activities constitute among other things increased studies on statutory regulations to promote the utilization of communications and information technology, to improve participation of government institutions, business circles, and the public in composing measures on the networks of communications and information technology to stimulate participation of the said elements in arranging policies on social-communications networking in the public, to encourage stakeholders in developing infrastructures of communications and information, and to set up communications forums of mass media watch organizations.

The arrangements of development plans of overseas information service system and the provision of information on public opinions concerning governmental policies and performance are aimed at promoting studies and development of communication and information.

It is realized that economic and social disparity which causes information deficiency has in turn caused wider a gap between the rich and the poor information society and this has

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been one of the main problems the nation has to face. Parallel with this, a foundation having been established in advancing information, communications and the mass media still requires follow-up actions to maintain the continuity of the goals and targets of related development programs. Following steps need to be taken into considerations are among other things: more intensive socialization of the Bill on Freedom of Access to Obtain Public Information, and promotion of independency and maturity of the press; the need of synergic works among institutions of information, communications and the mass media in composing minimum service standards as one of the measures on the utilization of information technology; the required efforts to facilitate cooperation forums between governmental institutions and the public in the context of nurturing understanding of the people to improve the participation and investment in the use of information services.

Other steps need to be more seriously facilitated and promoted are the role the community media should play, public understanding on the importance of mass media watch institutions, the relevant studies and researches in the framework of bettering mass media professionalism with characteristics among other things capable of cultivating excellent tradition of the press that adopts the principles of precision journalism (based on investigative reporting).

Still in this context, efforts are required to facilitate judicial reviews over socio-political aspects against the Law on Broadcasting and the press and media-related statutory regulations, particularly with regards to the formulations being considered controversial for the freedom of the press and for the process of democracy. It is unquestionable that the press here is a significant institution capable of maintaining and protecting political transparency and in safeguarding the very right of the society to get information related to the living needs of the people at large. Thus, it is the common concern of the people at large to maintain together the freedom and independency

Infrastructure Improvement Scheme

The main aim of the communications, information and mass media infrastructures improvement scheme is to improve the quality of information in all fields through the mastering and application of information and communications technology in a bid to better the nation's competitive edge in facing global competition.

Under the Broadcasting, Information-Telecommunication and Mass Media Development scheme some things worth noting are the establishment of information and communications networks between central and regional areas and among regional areas themselves in mutually promoting national development. It is under the scheme the ware house data are developed and to be the basis application of the system for the governmental information inflow order, and centers for the data interconnection on services and regulations of state institutions, serious preparations for the formation of centers for governmental information services, and preparation for communications and information network between the central and regional governments, and to overseas to struggle for the national interests.

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Following suit is the establishment of government and private websites to further disseminate information on government policies and measures by on-line. The availability of websites has, to some great extent, helped reduce the hindrances in disseminating information on government policies in a quicker way. For the future, websites may be used nation-wide. Its improved capacity may enable it to cater to varied and increased kinds of services. For the reason, broadcasting, information-telecommunication and mass media infrastructures have been developed and improved to make the flow of information and communications between the central and regional administrations smooth to underpin the national development programs and to strengthen the unity and integrity of the nation. Improving the quality of developmental information services has been undertaken place by among other things: the provision of information on regional potentialities in the form of chart, information concepts on the fields of economy, industry, socio-culture, politics, security and defense; the provision of public service advertisements; and the improvement of studies on the utilization of information-telecommunications technology at central and regional governmental agencies and institutions.

However, it is realized that what the nation needs now to further promote society-based independent information and communications establishments is the formulation of a grand design as the basis for the development of the Indonesian Society Electronic Infrastructure Network (ISEIN).

Quality Improvement of Services scheme

The scheme is more directed towards the development of information and communications networks between central and regional areas and among regional areas to mutually support national development activities and to improve their institutions, human resources, and information means and infrastructures, particularly in relation with that for overseas services in the framework of struggling for the national interests in the international forums.

So far, the scheme has been bringing about increased availability of information, and disseminated information, particularly for areas where private and public media hardly cover them, and improved capacity of governmental websites on the aspect of content, as well as the improved inter-institutional cooperation. It is also in the context of the scheme that a manual for governmental information services map has been made available to help governmental institutions and agencies or bodies in arranging their respective information services map, including regional administrations in composing their respective maps of their own potentialities.

Presidential Instruction No.3 of 2003 constitutes a legal basis for the development of e-government in Indonesia. In materializing the instruction a number of action plans have been introduced and carried out, including the so called Inter-Governmental Access Share Information system or Governmental Data and Information Exchange system prepared by the Ministry of Communications and Information, which will be tried out at the office of

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the Coordinating Body for Family Planning Program, the office of Ministry of Communications and Information, and the office of the Ministry of Agriculture.

Parallel with the introduction of the system mentioned above, manuals on the operation of e-government have been made available, including manual for the establishment and organization of regional governmental websites, of governmental websites infrastructure development, governmental electronic documentation management system, and institutional e-government development plan directive, and e-government human resources education and training directive.

In the context of promoting and popularizing the use of e-government by which people, particularly students, living in rural areas and even at rather remote areas may have greater access to information at local, national, regional as well as international levels, the Government, in this case the Ministry of Communications and Information, and Lembaga Informasi nasional (LIN)—the National Information Agency, in cooperation with local administrations have been trying to introduce an electronic network system called the Indonesian Society Electronic Infrastructure Network Scheme (ISEINS). Under the scheme, electronic infrastructures are installed at designated locations such as campuses of high schools and premises of local administrations or even premises of small-scale internet business undertakings locally known as "warnet", internet shops, to make more and more people get used to or familiar with internet, by which one can explore the information domain.

SOCIAL AFFAIRS

Social Welfare

Development in social welfare was held in cooperation among the government, business world, and the people, based on global, regional, and national commitment. The national commitment, as Articles of 27 and 34 of the 1945 Constitution state that every citizen has the rights to gain worthy livelihood and means of living and welfare.

Development policy in social welfare is directed to develop social resilience, improve appreciation to elderly citizens and veterans, step up concern to the people suffering from some social problems (PMKS), and improve physical and non-physical accessibility for disabled persons.

Pursuant to the policy in social welfare, the Government has arranged four programs:

1. Program for the Development of Social Welfare Potential, that is aimed at developing people's awareness, ability, responsibility, and active roles in coping with social problems in their neighborhood, and improving life's quality and welfare of people who have problems in social welfare.

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2. Social Welfare Services Professionalism and Management Quality Improvement Program, that is aimed at improving the quality and professionalism of social welfare services through development of alternatives for intervention in the fields of social welfare, improving the ability and competency of social welfare and social workers, and arranging social welfare standardization and legislation.

3. Public Policy Suitability Development Program in Coping With Social Problems, that is aimed at realizing public policy suitability in coping with social problems towards the realization of people's social resilience and people's protection from the effects of the fast development and social changes through employment network.

4. Social Problems Information System Development Program, that is aimed at identifying the kinds of data and information needed for decision making in social problems policy, developing information system needed as an early warning device, and developing the function and coordination of institutional information network to form an integrated social problems control.

In the period of 2001-2004 in the social welfare development, the Government has undertaken social welfare efforts to the PMKS. In poor family empowerment, the Government has given social guidance, motivation, and business guidance with business capital assistance to about 371.1 thousand heads of families, including women with unstable social-economic condition and in isolated customary communities (KAT).

About 9.3 thousand of poor families living in the slums have received assistance in the form of housing materials and tools to renovate their houses. Domestic refugee problems have been controlled by giving them assistance to overcome emergency condition and returning them back to their home, or relocating those who cannot be returned. Destitute and street children are helped through empowerment schemes. Until 2003, about 192 thousand destitute children and 143.3 thousand street children had received social empowerment services.

Rehabilitation services have also been given to disabled persons, juveniles and drugs victims, prostitutes, the homeless, beggars, and ex-prisoners. Besides, about 30 thousand elder lies have received social assistance.

Poverty and Unemployment

For the years of 2000 through 2003, poverty rates were 19.14 percent, 18.41 percent, 18.20 percent, and 17.42 percent. For 2004, data from the Central Bureau of Statistics (BPS) until February 2004 showed that there was 36.1 million out of 217 million people of Indonesia still living under the poverty line, or about 16.6 percent. From that sum, about 11.5 million people (12.6 percent) were living in urban areas, and 24.6 million people (19.5 percent) living in rural areas.

Meant by poor people is a person who consumes less than 2,100 calories of food per capita per day and cannot fulfill his/her basic non-food need.

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For the year of 2000 through 2003, the rates of open unemployment were 4.33 percent, 5.15 percent, 6.98 percent, and 6.96 percent.

In the even of the launching of Indonesia Country Assistance Strategy (CAS) for 2004-2007, it is stated that the efforts to decrease poverty rate in Indonesia which reached 20 percent in the crisis era, has still been stagnant at 16 percent. This is due to the low investment growth and lack of public facility in Indonesia.

INDONESIA'S POVERTY TREND

1999-2002 (in thousand people)

1999 2000 2001 2002 Annual average

growth(%)

Urban 15,643 12.312 8.599 13.319 1,15

Rural 32.332 26.431 29.268 25.075 -7,28

Total 47.975 38.753 37.867 38.394 -6,70

Source: BPS, 2003

In that event, representative head of the World Bank in Indonesia said that the World Bank has prepared four business platforms, namely the development platform for businesses activated by the people up to about 25 percent total loan, of about US$200 million per year; the local services platform about 20 percent, and the national loan platform about 20 percent of the loan. Through this new strategy, the World Bank has prepared loans of US$450-850 millions annually for Indonesia.

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TOTAL OF INDONESIAN POOR PEOPLE

BY EMPLOYMENT

1999-2002 (in thousand people)

Head of Household 1999 2000 2001 2002

Unemployed 4.063 3.560 2.349 3.072

Agriculture 25.997 20.109 23.375 20.605

Industry 6.069 5.380 4.401 4.471

Services 11.840 9.784 6.984 7.571

Total 47.969 38.833 37.109 35.719

Source: BPS, 2003

Program for Compensation of Fuel Oil Subsidy Reduction

In the effort to improving food sustainability and giving protection to poor families and empowering the people, since 2004 the Government has continued the Program of Rice Ceiling for Poor People (Raskin Program) and the Program for Compensation of Fuel Subsidy Reduction for Social Welfare (PKPS-BBM Program). For 2004, the raskin has reached 2,061,793 tons and has been distributed to 30 provinces, bigger than that of 2003 allocation of 2,048,390 tons. This program is implemented by distribution to poor families of 20 kg per family per month at the ceiling price of Rp. 1000 per kg.

The raskin and PKPS-BBM in the field of food is decided based on subsidy provided by the Government. In 2004, there were 15,746,843 poor families, whereas the budget plafond provided by the Government was only for 8,590,843 families (2,061,793 tons of rice).

RELIGIOUS AFFAIRS

There are six religions officially recognized by the Government, namely Islamism, Catholicism, Protestantism, Buddhism, Hinduism and Confucianism.

During the period of 1999-2004 the development in the field of religious affairs underlines the schemes of: Improvement of Religious Life Services, the Enhancement of Understanding and Application of Religious Teachings and Harmonious Life among Religious Followers, Religious Schooling Improvement, and Promotion of Religious Socio-Institutions and Religious Traditional Schooling.

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Responsible for policy, promotion, guidance, and development related to religious matters is the Ministry of Religious Affairs. During the period of 1999-2004 the Ministry has introduced and carried out many activities under the schemes mentioned above.

Improvement of Religious Life Service Scheme

The scheme aims to facilitate religious adherents to worship in accordance with their respective belief and religion. The scheme has been manifested through development and rehabilitation and maintenance of religious houses of worship (Islam mosques, Catholic/Protestant churches, Buddhist viharas, Hindus temples etc), hajj transit boarding houses, Islamic Marriage Halls or Religious Marriage offices, and improvement of hajj pilgrimage management, optimum use of houses of worship, provision of holy books etc.

Under the scheme, the Government and the communities have been striving for religious adherents to have ample facilities to do religious worship by building more houses of worship. In this context the Government either allots a sum of money or gives financial assistance to build or rehabilitate the houses. During the period of 2001-2003 the cumulative number of houses of worship having been rehabilitated was 5,187 units.

Regarding the enhancement of Religious Understanding and Application and the broadening of religious knowledge of religious adherents, the Government has helped them by offering religious holy books including their translations and interpretations, and other books related to religious teachings. The translations and interpretations of those holy books give boost to experts in this field to develop interpretations on holy books in accordance with temporal needs and developmental course. The number of holy books and their translations and interpretations of different religions procured per annum from 2000 to 2003 was 2,000,000 copies.

In improving services on marriage affairs, there are the Marriage Halls and Marriage Consulting Institutions. Each institution has been also tasked to promote household's welfare, and motivate households to practice family planning program. In addition to the institution, there are also the sub-district-based Offices for Marriage Affairs that also deal with remarriage and divorce. In 2002, the Offices of Marriage Affairs throughout the country handled 1,799,174 cases of marriage, 143,886 cases of divorce and separation, and 2,126 cases of remarriage. In handling marriage affairs those institutions need about 4,000,000 copies of marriage guidance books and marriage certificates per annum.

Promotion of religious institutions such as religious alms, contribution, donation, charities, and the like continues to be intensified to improve the people's welfare and to alleviate poverty. To deal with this promotion, a number of institutions have been established and made available in every province. For this purpose, more than thousands of people have attended upgrading courses.

In securing the use of plots of land used for religious interests such as plots of land donated for mosques, churches, temples, viharas, etc., 1,971 plots of land were certificated in 2001, some 2,193 plots in 2002, and 5,930 plots in 2003. Other action

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plans included the organizations of upgrading short courses for 1,057 persons to manage Islamic religious donations and other religious donations as well as the distribution of 69,483 copies of guidance books on management of socio-religious funds.

To promote the hajj pilgrimage management, various measures have been introduced and done to include the construction of new hajj boarding houses and rehabilitation of rather old hajj boarding houses, courses for officials who cater hajj pilgrimage affairs, and provision of books related to hajj pilgrimage codes and services. During the period of 2001-2003, there were accumulatively 255 groups of hajj pilgrims attending guidance courses.

The growing number of hajj pilgrimages has been to some extent due to better management of the services by the Ministry of Religious Affairs that is responsible for the services. The total number of Indonesians doing hajj pilgrimage in 2002 was 182,062 persons, and the number increased to 201,319 persons in 2003. Of the total number of persons who did hajj service in 2003 some 46.78 percent came from Java Island, some 15.14 percent from Sumatra Island and the remaining from other islands.

Scheme of Harmonious Life among Religious Adherents

The main aims of the scheme are: (1) the improvement of understanding and application of religious teachings by any individual, family, and community; (2) the reinforcement of foundation of harmonious life among the same religious adherents, and among different religious adherents; and (3) the establishment of social and national harmonies. In seeking out the aims, various activities have been taking place, including the formation of inter-religious adherents' cooperation networks, consultations and dialogues among religious leaders of different religions, the accelerated finalization of the Bill on Harmonious Life among Religious Adherents, etc. During the period of 2001-2003, thousands of people groups attended guidance courses on harmonious life among different religious adherents.

Still in the context of deepening religious understanding and application, Qur'an Recital competitions are always organized from local to national and even international level. So are of Christian "Pesparawi", Hindus "Utsawa Dharma Gita", and Buddhist Tripitaka Art Recital festival.

Religious-related conflicts are a potential to disintegrate this nation. In addressing this issue, various efforts have been sought out by prominent leaders of each religion through dialogues, meetings and forums to find out preventive and deterrent ways or peaceful solutions. These included the organization of Islam-Christian International Conference in Jakarta attended by a number of representatives from 18 countries, to study the historical relations between Islam and Christianity and discuss religious, socio-political and economic dimensions, as well as socio-reconciliations of Malindo I and II Declarations (declarations of reconciliation between hostile parties in Maluku), to say but some.

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The formation of the Institute for Studies on Harmonious Life of Religious Followers in Jogyakarta and its branch offices in Medan and Ambon, is expected to play an important means for religious intellectuals to jointly study and examine histories of plural communities to find out peaceful solutions when religious-related conflicts arise.

Having demonstrated an important role in appeasing religious-related conflicts are religious organizations such as the Indonesian Ulemas Council (MUI), the Indonesian Churches Association (PGI), the Indonesian Catholic Churches Conference (KWI), the Indonesian Hindu Dharma Parisada (PHDI), the Indonesian Buddhist Association (Walubi) and the Indonesian Confucian High Council (Matakin).

Improvement of Religious Schooling Quality scheme

The 1945 Constitution underlines that education sector shall have first priority of development. In addition, nine-year schooling is compulsory. Pursuant to what the Constitution stipulates and the compulsory nine-year schooling, the Ministry of Religious Affairs has taken necessary measures to improve religious curriculum, arrange competency standards for religious teachers, better Islamic boarding school and public school buildings, organize regular, model and integrated Islamic boarding schools, and equip those schools with better teaching aid devices and equipment, etc.

Under the scheme a large number of religious teachers and lecturers have had chances to attend up-grading courses, workshops, seminars, and even colleges and other higher learning institutions at home and abroad. Students are at the same time encouraged to attend not only curricula but also extra-curricula activities. Reference books of various disciplines in large number are also made available to allow students to enrich their knowledge.

Promotion of Traditional Religious Schooling scheme

This scheme is aimed at: (1) empowering and improving the capacity and quality of socio-religious institutions, and (2) serving educational services for the public, particularly for villagers of economically-weak bracket.

Under the scheme, various action plans have been undertaken, including the provision of reference books (numbering 542,000 copies in 2003 alone), training/guiding courses on religious affairs attended by many people, and development of socio-religious institutions, which in turn are expected to be able to organize trainings on empowering people's economy. Also under the scheme are the improvement of means and infrastructures of schooling by providing teaching aid devices and equipment, and the development of a number of workshops for students to do practical teaching system.

Regarding the development of traditional Islamic boarding schools, particularly their schooling quality, the Ministry of Religious Affairs, together with other governmental agencies and non-governmental institutions, gives priority to the promotion of the schools by, for instance, installing websites, sending religious teachers/lecturers to Yemen and

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the Middle East countries and other countries, encouraging the establishment of model Islamic boarding schools, providing scholarships

to students from rather remote and isolated areas with the hope that they would later set up similar schoolings at their native villages or hometowns, and helping the development of agro-businesses at 60 Islamic boarding schools.

Education

The 1999-2004 Guidelines of State Policy states that education development policy is directed to extend and equalize the chance to reach high quality education to all Indonesian people.

The main agenda of education development in Indonesia is to develop and stabilize the national education system based on decentralization, scientific autonomy, and management principles as education development direction in Indonesia. In 2003, the Government enacted Law No. 20 of 2003 on National Education System to replace Law No. 2 of 1989 on National Education System, to be followed by preparation of 14 Government Regulation bills as materialization of said law.

Reformation of the national education system, as entrusted by the amended 1945 Constitution, Article 31 directs the Government to allocate education budget up to 20 percent of the National Budget and the Regional Budget. Due to the Government's budget limitation, however, that allocation has not been fulfilled, and will be fulfilled by stages.

Based on Law Number 20 of 2003 on National Education System, the strategy of national education shall consist of implementation of religious teaching and good behavior, development and implementation of competency-oriented curriculum; educative and dialogic learning process; empowering educational evaluation, accreditation, and certification; enhancing the professionalism of teachers and educational manpower; supplying educational facilities; educational expenditures that is in accordance with the principles of justice and equality; organizing open and equitable education; implementing compulsory education; implementing autonomous educational management; empowering people's participation; and implementing supervision of the national education system.

In accordance with Law Number 20 of 2003 on National Education System, schooling in Indonesia shall begin from kindergarten in two years; followed by next higher educational level called primary school in six years. After graduating from primary school, pupils can continue to next higher level that is called junior secondary school in three years, and after graduating from junior secondary in three years or to vocational senior secondary school in three or four years. Graduates from general senior secondary schools can continue to diploma or graduate programs or other types of higher education, such as university, institute, graduate school, academy, or polytechnique. If they choose graduate program, they can continue to post-graduate study and if they choose diploma program, they can continue to specialist program.

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Pre-school and Basic Education

Basic education is general education of nine years, i.e. six years of primary school and three years of junior secondary school. The goal of basic education is to develop student as individuals, members of society, citizens and members of humankind, as well as to prepare them to pursue studies in senior secondary education. Basic education provides the learners with basic knowledge and skills. Included in Basic Education are Islamic general primary school called Madrasah Ibtidaiyah, equivalent to primary school and Islamic general secondary school called Madrasah Tsanawiyah, equivalent to general junior secondary school, managed and supervised by the Ministry of Religious Affairs.

Pre-school education aims at stimulating physical and mental growth of children outside of the family circle before entering primary education that can be held in formal school system or informal education. Among the types of pre-school education available are kindergartens at the formal schools and playgroups and day-care centers at the out-of-school form. Kindergarten is provided for children for one to two years of education, while playgroups and day-care centers are attended by children of at least three years old.

Primary School

In 2002/2003 academic year, the total of private and state-run primary schools was 169,147, showing a decrease from the previous academic year's 171,315. The total pupil in 2002/2003 was 29,050,834 showing an increase from the previous academic year's 28,926,377. On the other hand, total of teachers in 2002/2003 was 1,234,927, showing an increase over the previous academic year's 1,164,808.

Primary school students, the hope of future generation

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Junior Secondary School

The number of private and state-run junior secondary schools in 2002/2003 academic year was 32,322, showing an increase over the previous academic year's 31,626. In addition, total of pupils in the academic year of 2002/2003 was 9,936,647, an increase over previous academic year's 9,757,123. On the other hand, total of teachers on the academic year rose to 376,512 from the previous academic year's 384,843.

Senior Secondary Education

The program for the development of senior secondary education includes general secondary schools, vocational secondary schools and religious secondary schools that aims at extending the scope and accommodation capacity of the schools, improving educational quality as a basis for the pupils to continue their studies to a higher level of education or the preparation of student to enter the work market.

Secondary education is made available to graduates of basic education. Secondary education consists of general secondary schools, vocational secondary schools, and religious secondary schools. Secondary education gives priority to continue and expand the basic education and prepare students to become members of society with knowledge and skills to make relations with social environment, culture, and natural environment and to develop further skills to enter the work market, or to continue their studies to a higher level of education. The length of secondary education is three years for general secondary schools and four years for vocational education.

The number of general senior secondary schools in 2001/2002 academic year totaled 7,785 and 8,036 in 2002/2003 academic year. The number of teachers in 2001/2002 academic year was 252,682, and 261,089 in 2002/2003 academic year. An increase was also shown in the number of pupils i.e. 3,024,176 pupils in 2001/2002 academic year and 3,143,730 pupils in 2002/2003 academic year.

The number of vocational secondary schools in 2001/2002 academic year was 4,522, and 4,943 in 2002/2003 academic year. The number of teachers in 2001/2002 academic year was 90,806 and 96,672 in 2002/2003 academic year. An increase was also shown in the number of pupils i.e. 2,027,464 pupils in 2001/2002 academic year and 2,099,753 pupils in 2002/2003 academic year.

Higher Education

The national development program for higher education is aimed at developing the higher education system, increasing the quality and relevance of higher education with the job market, and enhancing an equitable opportunity to continue studies to the higher level education, particularly to students with excellent achievements but coming from poor families. The goal of the program is to realize autonomous management to four state-run higher learning institutions, i.e. the Bandung Institute of Technology (ITB) in West Java,

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the Bogor Institute of Agriculture (IPB), also in West Java, the University of Indonesian in Jakarta, and Gadjah Mada University in Yogyakarta, and to do pioneering work

for its implementation of other state-run higher learning to increase the number of graduates absorbed in employment and to increase the crude participation rate (APK).

Higher education is an extension of the senior secondary education, consisting of academic and professional education. Higher education is made available to prepare the students to become members of society with academic and/or professional skills, who have ability of education that holds higher education is called the higher learning institutions in the form of academies, polytechnics, schools of higher learning, institutes, or universities. The length of higher education is called the higher learning institutes, or universities. The length of higher education is three years for diploma program, and four years for undergraduate studies and finally to post-graduate program for three more years.

Higher Learning Institutions

In 2004, the number of state-run universities was 81 and private universities 2,399. The number of students studying in state-run universities in 2002/2003 academic year was 2,935,848 and the number of lecturers was 143,096.

In 2003/2004 academic year, all of Indonesia's 81 state-run universities admission of new entrants showed a decrease from 82,969 in 2002/2003 academic year to 82,190 seats for new entrants in 1,615 study programs. In the year of 2003/2004 the participants of State University Admission Test (SPMB) who passed it were 78,829 from 350,306 who had registered for the test. The number of SPMB participants who passed the admission test in 2002/2003 academic year was 78,829, showing a decrease 3.24 percent compared to 471 in 2001/2002 academic year.

In 2003/2004 academic year, the status of six leading State Higher Learning Institutions (PTN) has been changed to be State-Owned Higher Learning Corporate Body (PT-BHMN). They are the Bandung Institute of Technology (ITB), the Bogor Institute of Agriculture (IPB), the University of Indonesia (UI), the Gadjah Mada University (UGM), the North Sumatra University (USU), and the Indonesian Education University (UPI) in Bandung, West Java. The establishment of State Higher Learning Institutions with the status of State-Owned Higher Learning Corporate Body (BHMN) is aimed at decreasing government financial burden in financing the education sector, in addition to the autonomous implementation of Higher Learning Institutions and the application of Government Regulation No. 61 of 1999 on Implementation of Indonesia's State Higher Institutions as State-Owned Higher Learning Corporate Body.

Research University

With a status of State Owned Higher Learning Corporate Body (BHMN), the University of Indonesia (UI) has targeted its program to become a research university in 2010, but it

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needs government support especially through laws and regulations. According to the Rector of UI, Usman Chatib Warsa, actually UI has taken action as a research university, by establishing a noble industry, namely the Institute of Human Virology and Cancer Biology (HIVCB), which involves a world expert, Professor Robert Gallo of University of Maryland, United States.

The IHVCB laboratory has started its activity since August 2004, together with physical facility building in the UI Campus of Salemba, Jakarta.

Informal Education

Development for informal education (PLS) is aimed at providing services to the people who do not receive or have not received a formal education to develop their selves, behavior, knowledge, and skills, self-potential, and developing productive efforts to increase their welfare. In addition, the PLS Program is directed to give basic knowledge on professional entrepreneurship and skills for themselves and their families. The goal of PLS program is to enable people or students who do not receive or have not received formal education. They consist of people who have not yet finished nine-year compulsory basic education. The program is also directed to empower centers or workshop of people's learning activities.

The main agenda of the PLS Program is to accelerate illiteracy eradication through the development of functional literacy, especially to people of 10-44 years old. The existence and usage of book centers shall be developed and increased to make people love to read. The efforts to eradicate three-old illiteracy (the Latin words and number illiteracy, Bahasa Indonesia illiteracy, and basic education illiteracy) are developed by their types to accommodate drop-out students from various paths, kinds and levels of education services and quality and quantity of student of Package A Learning Group (equivalent to primary school), Package B Learning Group (equivalent to junior secondary school) to support nine-year basic education, and to develop learning model for sustainable education program with skill and entrepreneurship orientation. Types of informal education may include courses, education and training, group learning, centers for group community education; and religious education.

In line with this development, the rate of literacy people by the age of 15 years off and up increased to 89.8 percent in 2003.

International Olympic

In 2003, Indonesia participated in Natural Sciences and Mathematics Olympics, both in national and ASEAN level followed by ten nations and won gold medals, one silver and two bronze medals. In 2004's, representatives from Indonesia followed the Asian Physics Olympic, and they gained six gold medals. In the 2004's XXXV International Physics Olympiad in Pohang, South Korea, Indonesia gained one gold medal, one silver medal, and one honorable mention.

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SCIENCE AND TECHNOLOGY

One of the duties of the Ministry of Research and Technology is to assist the President of the Republic of Indonesia to formulate policies to be implemented by the Indonesian Government specifically in utilizing, developing and mastering science and technology for the national development. The implementation of these policies are based on several regulations: the 1945 Constitution, the Guidelines of State Policy (GBHN),

National Development Programs (Propenas), Law No. 18 of 2002 on National System of Research, Development and Application of Science and Technology, and Development Programs of National Strategic Policy of Science and Technology (JAKSTRANAS IPTEK).

Article 31 clauses 5 of the Amended 1945 Constitution stipulates that the Government shall develop science and technology based on religious values and unity of nation for the development of human dignity and welfare. This is further emphasized in Decree No. IV/MPR/1999 of the People's Consultative Assembly concerning the Guidelines of State Policy (GBHN), which states that Indonesia shall improve her ability in mastering, enhancing and utilizing science and technology, including the capability of Indonesian people and business players, especially Small and Medium Enterprises (SMEs) and cooperatives, in order to increase product competitiveness based on local resources. This also means that technology shall be able to carry out activities in increasing health, education, food fulfilment, industry and others, to meet self sufficiency and improvement of the nation's competitiveness.

In parallel, the National Development Programs (Propenas) 2000-2004 emphasizes that science and technology (S&T) is expected to take part in the acceleration of the economic recovery, the strengthening of the foundation of sustainable and equitable development, as well as the development of cultural resilience and social welfare.

To develop science and technology effectively, oriented to people's need, promoting the real benefits, and fulfilling the whole regions, in 2002 the Government ratified Law No.18/2002 on National System of Research, Development and Application of Science and Technology. This law forms a guideline to the formulation of the National Science network system. Hence, the role of the central government, regional governments and society, especially business players, can be in synergy in the development of the national science and technology.

With determined policies, therefore, the implementation of various programs is related with the mastery of science and technology in the frame of strengthening national economy and developing social life. To materialize such contribution, the Ministry of Research and Technology implements the Strategic Policy of National Science and Technology Development 2000-2004 (JAKSTRA IPTEKNAS).

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Achievement

To increase the science and technology capability and culture, the Ministry has carried out some priority research programs such as the Integrated Priority Research Scheme Program (Riset Unggulan Terpadu), the International Integrated Priority Research Scheme (Riset Unggulan Terpadu Internasional), the Partnership Priority Research Scheme (Riset Unggulan Kemitraan), and the Selective Research Scheme for Social Sciences and Humanities (Riset Unggulan Kemasyarakatan dan Kemanusiaaan). In these research schemes, participants initiate research topics and plans of proposed activities. Another priority research scheme program is the National Strategic Priority Research Program (Riset Unggulan Strategis Nasional). In this top-down research, the Ministry initiates plans and ideas of intended activities for research and technology.

The Integrated Priority Research scheme is designed, among others, to orient the ability of human resources of research institutions, be they in central and regional governments, universities or industries, toward the creation of an integrated network to improve their ability in enhancing basic and applied science and technology.

The International Integrated Priority Research scheme has carried out international joint research and development among Indonesian researchers and international research institutions/universities in various fields, such as with CSIRO-Australia and University of Twente in the Netherlands (marine), Oregon State University-USA (agriculture and food), Katolieke Universiteit Leuven, Belgium (environment), and Shinshu University of Japan (health).

The Selective Research Scheme Program for Social Sciences and Humanities is designed to bridge the gap between social sciences and humanities with other sciences and to develop theories and new concepts in this field. In 2003, this program conducted applied research and science development researches.

The implementation of the national strategic research scheme program covers six activities of enhancement in the fields of: (1) Information technology and microelectronics that produces gateway media prototype, antenna planner array prototype, IP Core video transcoder; (2) priority fruits pineapple, banana, mangosteen for consumption and raw material for industry; (3) group fish cultivation; (4) diversification of corn-based stapple food; (5) light Aluminium Engine for various transportation modality; and (6) oil-palm downstream industry to lengthen its value-added chain.

The Partnership Priority Research scheme is one of the Ministry's policies in utilizing science and technology in industrial sector through research cooperation between research institutions and industries. The Government, together with industries, funds this research in the form of cost sharing. In 2003 this program financed 35 research activities.

Start-Up Capital. This program is designed to bridging the S&T activities, done by research institutions and universities, with business activities. In 2003, this program executed research activities in the fields of health, agriculture and food,

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telecommunication and information, manufacturing laboratory facilities for education, chemical and post harvest.

The Advancement of Regional Innovation through Business Technology Center (BTC). The concept of BTC is the strategy of the Ministry to accelerate the process of interaction between business world and technology suppliers in regional areas of which their activities will very much depend on the market and industrial need. In 2003, the BTC had been established in Batam, Yogyakarta, and Jakarta. To internationally broaden the market, in term of science, technology and industry, the government of Germany also supports this program through training and networking channeling.

Incentives for Strengthening Technology and Management (SIPTEKMan). This scheme is aimed at encouraging technology-based small-medium-scale industries (UKM) to increase their productivity, product diversification, enhance marketing network and simultaneously absorb numbers of manpower.

Information Technology Kiosk (WARINTEK) is a program aimed at cultivating and utilizing S&T information in society. This program is adopted from UNESCO's "Information for All Program". Warintek is equipped with a data base in the form of an "Educating Nation" CD-ROM, comprising of Appropriate Technology, Medicinal Crops and Food Diversification Information. To further improve society knowledge, the Ministry has distributed computers to some education institutions, non-government organizations, and regional governments such as Malang, Jambi, Purbalingga, Yogyakarta, Garut, Magelang, Bandung, Riau, Bengkulu.

Other incentive programs conducted by the Ministry of Research and Technology are among others: Center for Intellectual Property Right (Sentra HKI), OLEH Paten, Center of Technology Promotion and Marketing (Sentra Promptek).

To promote the socialization and utilization of S&T, several programs have been executed, such as the enhancement of S&T information system, covering the development of Digital Library, the promotion of Laboratory Accreditation, the development of S&T activities using multimedia information system, as well as the promotion of regional S&T.

Along with the incentive scheme programs, the Ministry of Research and Technology has also executed some specific or thematic programs, such as Bioisland and Agrotechnopark. To increase the added value of biological resources in Indonesia, the Ministry has carried out Bioisland planning and development in Rempang, Batam Island. Bioisland is an integrated research and development area for commercialisation of biotechnology. The objectives of Bioisland development are to increase the biotechnology role in the global economic and human welfare, to strengthen the synergy of biotechnology-based industries and to provide an integrated infrastructure for biotechnology research and development. The Bio-island's field of works covers agricultural and food biotechnology, medical and pharmaceutical biotechnology, industrial and environment biotechnology as well as marine biotechnology.

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Agrotechnopark, located in Muara Enim, South Sumatra, is the development of an integrated agro system emphasized on technology transfer. Involved in this program are Regional Government, Universities and industry. The main duty of Agrotechnopark is to develop human resources through agribusiness application in the field of agricultural (corn and peanut) cultivation, animal husbandry (laying pullets, cows, ducks, shrimps and sheep) and post-harvest process. In 2003, this program built some physical constructions such as clearing of soil, corn plantation, construction of post-harvest processing, hatchery and shrimp pond, and animal provision.

In order to strengthen the basis and sharpen the direction and priority of S&T development, the Ministry is dedicated to formulate four Government Regulations as the implementation of Law No.18/2002. The four regulations are: Government Regulation on Technology Transfer by Research Institution, Government Regulation on Research Permit for Foreigners residing outside Indonesia, Government Regulation on the Permit of Hazardous Research, Development and Application of S&T, Government Regulation on Allocating part of enterprise earning. In 2003 the Ministry accomplished the examination of the two drafts of those regulations, namely Government Regulation on Technology Transfer by Research Institution, and Government Regulation on Research Permit for Foreigners residing outside Indonesia.

The Ministry of Research and Technology also conducts some programs related to guidance and strengthening the S&T Institutions. Included in this program are the development of Eijkman Institution, PUSPIPTEK and PP Iptek. The Eijkman institution has conducted some researches and developments in health and medication. PUSPIPTEK development program is another priority program, which is expected to support the growth of technology-based industry. In the frame of S&T socialization, the Ministry has introduced and facilitated S&T to the people of the early age. This effort is implemented through the development of Center for S&T Visual Display (PP IPTEK) located at the Beautiful Indonesia in Miniature Park (TMII) and in several other regions.

To enlarge productivity and competitiveness for the national utilization and development, the Ministry has also set up coordination with its LPNDs (Non Departmental Government Agencies), namely the Agency for the Assessment and Application of Technology (BPPT), Agency for National Nuclear Energy (BATAN), Indonesian Institute of Sciences (LIPI), National Institute of Aeronautics and Space (LAPAN), BAKOSURTANAL (National Coordination Agency for Survey and Mapping), BSN (Agency for National Standardization), and BAPETEN (Nuclear Control Board). Furthermore, the ministry has also promoted cooperation with Regional Research and Development Institutions, Higher Education Institutions, Board of National Research Development and other stakeholders through among others developing Regional Research Development Boards and fostering S&T cooperation.

In order to build national superiority and competitiveness, the Ministry of Research and Technology steps up partnership and networking between S&T institutions, and business society be they in domestic or international scope. Some of the cooperation, for instance,

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include the ASEAN COST (Committee on Science and Technology) which is held twice a year, and bilateral relations with India, the Republic of China, and Germany.

Total budget for executing those all mentioned programs amounts to Rp 172,18 billion (routine and development additional budget), some 85% of which is allocated to fund "policy instrument" programs, such as incentive scheme, and priority research scheme programs. Meanwhile, the remaining 15% of budget is allocated to fund "policy study" program, that is the study of S&T Development.

Health

In building health for the people, the Government has determined Healthy Indonesia Vision 2010, with its four missions, namely, health development should be able to: 1) motivate national development with health outlook; 2) urge people's independence to live healthily; 3) keep and improve qualified, commonly prevalent, and attainable health service; 4) improve individual, family, people, and neighborhood health.

This Healthy Indonesia Vision 2010 is also aimed at improving 16 health indicators, as mentioned in this table:

HEALTHY INDONESIA VISION 2010

Health Indicators Target

Life Expectancy at Birth 70

Infant Deaths per 1,000 Live Births 40

Childhood Deaths per 1,000 Live Births 58

Childhood Pneumonia Deaths per 1,000 Children 2

Childhood Diarrhea Deaths per 1,000 Children 1

Maternal Deaths during Childbirth

per 100,000 Live Births 150

Dengue Fever Infections per 100,000 People <1

Malaria Infections per 1,000 People 0.5

Recovery Percentage from Tuberculosis of the Lungs >85

Percentage of HIV/AIDS Carriers to Risk Population <1

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Acute Flaccid Paralysis (AFP),

Children Under 15 Years per 100,000 People <1

Percentage of Infants with Low Birth Weights 5

Percentage of Children With Sufficient Nutrition 80

Percentage of Pregnant Women With Malnutrition -induced Anemia 45

Prevalence of Disorders due to Iodine Deficiency 6

Percentage of Women of Child Bearing Age

With Chronic Energy Deficiency Syndrome 10

Source: Department of Health (2002)

In building health for the people, the result of health development implementation can be seen at among others in people's health and nutrition and illness pattern. The status of people's health and nutrition can be seen among others from infants death rate, death rate of children under five years age, maternal death rate during childbirth; life expectancy at birth; and the status of people's nutrition. Infants death rate (AKB) has declined from 46 per 1.000 live births (Indonesia Demographic and Health Survey SDKI 1997) to become 35 per 1,000 live births (SDKI 2003). Children Under Five Years of Age death rate has decreased from 79 per 1,000 live births (SDKI 1997) to 46 per 1,000 live births (SDKI 2003). Meanwhile, Maternal Death during Childbirth (AKI) has gone down from 334 per 100,000 live births (SDKI 1997) to 307 per 100,000 live births (SDKI 2003). Along with the decline of Infants Death rate, Life Expectancy has increased from 63 years (1990) to become 66 years (2002-2003). Meanwhile, Children Under Five Years Old with Lack of Nutrition rate has declined from 30 percent in 1998 to 27.5 percent in 2003.

The National Development Programs (PROPENAS) 2002-2004 has determined six health programs. Following are the programs, their aims, and the results based on the performance indicators of the PROPENAS:

1) Healthy Environment, Healthy Behavior and Community Empowerment Program is aimed at promoting the quality of healthy living environment that supports the growth of children and youth, fulfills basic needs to live healthily and enhances social interactions, and keeps the community out of threats coming from the neighborhood, empowers individual, family and community health in the frame of keeping, improving, and protecting their health and environment towards the development of a healthy, self-supporting and productive community through improvement of knowledge, development of positive behavior, attitude, and active participation of individuals, families, and the communities in line with local socio-culture. In general, the results of this program show an increasing trend, among others

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an increase of families using healthy toilet from 61.5 percent in 2001 to 68 percent in 2003; rising percentage of families using clean water in urban and rural area from 77.2 percent in 2001 to 80 percent in 2003.

2) Health Efforts Program is aimed at promoting equitable distribution and the quality of effective and efficient health efforts and their affordability by the community.

The result of this program in 2001 and 2003 included: the scope of Universal Child Immunization (UCI) reaching 72.9 and 80 percent respectively; and the scope of medical treatment at childbirth by health workers reaching 68 percent and 70 percent respectively.

3) Improvement of Community Nutrition Program is aimed at improving the intellectuality and productivity of human resources through the improvement of family self-supporting efforts to improve nutrition, improvement in nutrition services to reach good nutrition, and improvement of quality food diversification to strengthen household food reinforcement.

The results of the program reached in 2001 and 2003 included: prevalence of malnutrition to children under five years old reaching 26.1 percent and 27.5 percent respectively; prevalence of chronic lack of energy (KEK) among pregnant women reaching 20.1 and 16.7 percent respectively; iron anemia (AGB) of pregnant women reaching 40.1 and 45 percent respectively; lack of Vitamin A (KVA) among children under five years old reaching 0.33 percent; households consuming iodized salt reaching 64 percent and 78.5 percent respectively; and exclusive breast feeding (ASI Exclusive) to infants of 0-4 months old reaching 52 percent and 53 percent respectively.

4) Health Resources Program is aimed at stepping up the number, quality, and distribution of health workers, improving the number, quality, effectivity and efficiency of health budgeting and improving the availability of facilities, infrastructures, and logistic support to health services, which is equitably distributed, affordable and usable by the community.

The results of the program reached in 2001 and 2003 among others were: people following the financing system of pre-efforts 20 percent and 21.8 percent respectively; and ratio of health workers compared with the number of people reaching 85.64 per 100,000 people and 120,46 per 100,000 people.

5) Drugs, Food and Hazardous Material Program is aimed at protecting people from the dangerous effect of the abuses of drugs, narcotics, psychotropic, and addictive substance (NAPZA), protecting people from usage of pharmaceutical, food, health equipments which do not meet the requirements of quality and safety, securing the availability and equitable-distribution of quality medicine needed by the people, and improving pharmaceutical industries competitive power potential based on domestic natural resources.

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The results of the program are among others: protecting people from the dangerous effect of the abuses of drugs, narcotics, psychotropic, and addictive substance (NAPZA), reaching 100 percent of the processed cases in 2003; control upon 65 percent of production and distribution of health pharmaceutical in the frame of Good Management Practice (GMP) in 2003; introduction of the concept of essential drugs of the National Essential Drugs List (DOEN) as an instrument of rational drugs consumption and cost effective; determining drugs list and drugs price standard ceiling of basic health drugs as a guide for district/city in connection with natural disaster, social riots, epidemic, etc. In 2003, through the Program for compensation of Oil Fuel Subsidy Reduction (PKPS BBM), the Government distributed drugs for the community.

6) Health Development Policy and Management Program is aimed at facilitating health efforts implementation through an efficient and effective policy and management and supported by science and technology.

The results of the program reached in 2003 were among others: determining 56 laws and regulations to become health program policies; making 199 research works that covered policy studies, health technology services, contagious diseases eradication, ecology, pharmacy and traditional medicine, operational research for intensification of contagious diseases eradication; health fostering research, and publishing of 174 articles on scientific researches.

AIDS Carriers in Indonesia

The first AIDS case in Indonesia was diagnosed in 1987, only six years after the first in the U.S. Drug use by injection and commercial sex have been fueling the epidemic, at the rates reported by the United Nations Program on HIV/AIDS (UNAIDS) as high as 26.4 percent among sex workers in Papua and 47 percent among drug users in Jakarta.

Most HIV-infected are males (77 percent) while the most-affected age group are those between 20 years and 29 years old (41.7 percent).

The Government provided 30 percent of the total budget spent on the anti HIV/AIDS movement, with the rest provided by foreign donors.

Indonesia also allocated US$5.7 million from its 2003 fiscal budget for the fight against the virus, up from US$3.25 million in the previous year. Separately, foreign donations increased to US$19.9 in 2004, from US$9.3 million last year.

In Indonesia, drugs for AIDS, widely known as the antiretroviral (ARV) treatment, remains big concern due to its unaffordable cost. Generic ARV has been available in this country since September 2001, imported from Thailand and India.

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AIDS Carriers in Indonesia

(90,000-130,000)

43,000 injecting drug users

10,000 gays

8,000 sex workers and 6,000 of their customers

1,500 transvestites and 6,000 of their customers

24,000 couples from the above mentioned groups

Source: Department of Health, 2002

Since August 2004, the Government has provided free AIDS medicines in nine hospitals in Jakarta, namely: Cipto Mangunkusumo Hospital, Dharmais Hospital, Sulanti Saroso Hospital, Persahabatan Hospital, Duren Sawit Hospital, Mintoharjo Hospital, Gatot Subroto Hospital, Polri Hospital, and Fatmawati Drugs Dependency Hospital.

Demography and Family Planning

The policy in the field of demography and family planning is to improve the quality of people through birth control, decrease death rate, improve the quality of the Family Planning Program, as well as develop and harmonize the policy of demography by noting the aspects of demography and environment as the center of development.

The number of Indonesian people has been increasing yearly, although the growth rate tends to decrease. Based on Population Censuses (SP) of 1990 and 2000, the number of Indonesian population was 179.4 million people and 202.2 million people, with population growth reaching 1.49 percent in the period of 1990-2000, or lower than that of previous period of 1980-1990 (1.97 percent). Success in controlling population showed in the significant decline of birth rate. In 1997, the Total Fertility Rate (TFR) of reproduction age women reached 2.8 children, but decreased to 2.6 children in 2002 (Indonesia Demographic and Health Survey SDKI 2002). The decrease of the TFR was a consequence of increased contraceptive devices (prevalence) of fertile age spouses. Prevalence rate increased from 57 percent in 1997 to 60 percent in 2002 (SDKI 2002-2003). To develop the information system, demography administration tryouts had been implemented in 13 districts in 6 provinces (Banten, West Java, Central Java, Special Territory of Yogyakarta, Bali, and North Sulawesi). Besides, the Government had arranged legal support for the waiting of the Bill on Demography Administration and academic draft on population data protection.

For demography and Family Planning, the Government has setup some programs, as follows:

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1. Demography Policy Appropriateness and Development Program, which is aimed at realizing appropriateness of demography policies in all aspects of development.

The results reached until 2004 are among others: formularization of demography administration system and policy, population numbering system, demography effect analysis and indicators, bill on Demography Administration and Family Development as the amendment to Law Number 10 of 1992. Meanwhile the programs relating to children development are among others: Master Plan of Children Welfare and Protection (KPA); National Campaign on Free Birth Certificates; document on National Program for Children Protection (PNBAI) 2015 which is children program in national scope covering the fields of education, health, children protection, and HIV/AIDS controlling, and the establishment of the Indonesia Children Protection Commission in 2003 through Presidential Decree Number 77 of 2003.

2. Family Empowerment Program is aimed at improving family welfare and resilience as the smallest unit in community, marked by among others increase of family awareness and empowerment in fulfilling basic, social, and psychological needs.

In 2004 (until March 2004) Prosperous Family Income Improvement Effort (UPPKS) groups were still recorded at 342.2 thousand groups, covering about 7.8 million of families primarily from Pre-Prosperous Family (KPS) and Prosperous Family I (KS-I). Prosperous Family Undertaking Credit (Kukesra) reached 50.9 of the total UPPKS members.

3. Youth Reproduction Health Program is aimed at improving knowledge, behavior and positive attitude of youths on reproduction health in the form of improving their reproduction health degree to prepare family living to support the improvement of efforts for the development of future generation.

During the period of 2000-2004 the Government has established the Youth Consultation and Information Center (PIK) for 662 groups. Besides, there were also established the Concern-for-Youth Family Groups (KKPR) for 21.1 thousand groups, developed the Ceria (happy) Internet Website, and training for promotion force for Youth Reproduction Health for 15.3 thousand people.

4. Family Planning Program is aimed at fulfilling the need for qualified Family Planning and reproductive health services, and controlling the birth rate that in turn improving qualified small families.

The results of the program include the capability to ask Fertile Age Spouses (PUS) to become new family planning participants at the average of 3.9 million for the past five years (2000-2004 until April 2004), while active family planning participants in 2004 reached about 27.2 million.

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The SDKI has also showed increase of family planning participation for the past five years. In SDKI 1997, the participatory rate of family planning reached 57.4 percent, and increased to 60.3 percent in SDKI 2002-2003.

The family planning participation has successfully decreased the birth rate, that is the number of children per reproductive age woman (15-49 years) or the Total Fertility Rate (TFR) had decreased from 5.6 children per women in 1970-s to 3.0 in SDKI 1991, and become 2.8 in SDKI 1997, and at last to 2.6 children per woman in SDKI 2002-2003.

The relationship between the Family Planning Program and the population number is shown from the efforts above. In line with the increase of people's socio-economic degree, the family planning program has taken part to decrease the population growth rate in the past three decades. Based on Population Censuses (SP) 1990 and 2000, the number of Indonesian population was 179.4 million and 206.2 million respectively, with population growth rate of 1.48 percent in the period of 1990-2000, or lower than that of in the period of 1970-1980 (2.32 percent) and the period of 1980-1990 (1.97 percent).

5. Family Planning Network and Institutional Strengthening Program is aimed at improving self-support as well as the scope and quality of Family Planning and reproductive health , primarily those undertaken by the community.

In early 2004 there were recorded Rural/Urban Community Institutions (IMP) as follows: 80,533 Village Family Planning Assistant Supervisors (PPKBD), 363,066 Sub-PPKBD and 749.034 Family Planning Groups having participated in as the spearhead of Family Planning in the field.

The efforts to improve the Private Family Planning Network that consists of Family Planning Clinics, doctors and private midwives giving family planning services to community were recorded at 51,470, consisting 2,920 Private Family Planning Clinics, 10,195 Private Doctors, and 35,478 Private Midwives. The proportion of the patients serviced by this private services had been increasing from 41.9 percent in SDKI 1997 to 62.5 percent in SDKI 2002-2003, and the majority of them were held by private midwives.

Housing

Housing development constitutes a major concern of the Government to improve the people's living standard, particularly of economically low income bracket, by owning proper and healthy houses. Under the 1999-2004 National Development Plan, housing policy aims to: (1) meet demand for appropriate and affordable houses, particularly by people of low income bracket; (2) encourage the development of large-scale residential areas through schemes of ready-to-be built housing areas, and of separate unit of ready-to-be built environment; (3) promote the development of simple high-rise apartments for people of low income bracket at urban areas with high population density, industrial areas

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and trading areas; (4) promote sound environment at residential areas; and (5) help recover the living of refugees, and victims of natural disasters or calamites through the establishment and rehabilitation of damaged houses and their environmental infrastructures and facilities.

During the period 2000-2004, there were 378,297 homes built for people of low-income bracket under a mortgage, which is a system of installment purchase through loans from some sources (banks etc); 474,602 homes constructed under micro-mortgage scheme; 66,573 homes erected by home owners. In addition there were a number of simple apartments having 6,114 units of homes constructed at urban areas; slum clearance of 3,742 ha through the supply of micro-mortgage for 6,000 units; and renovation of 191,968 homes having historical values or traditional styles covering 641 ha in 145 areas.

The number of owner-occupied homes keeps growing, and so does the number of rented dwellings. However, there are problems to face in addressing the housing supply and conditions, among other things: about six million heads of families still do not own homes, about 800,000 homes need to be built to keep pace with the country's population growth, limited economic capacity of the said families (some 70 percent of them earn less than Rp1.5 million per month), the increase of slum dwellers to about 17.2 million persons in 10,000 locations, and not-healthy-for-occupation homes numbering about 14.5 million (28.22 percent of the total)

In tackling the short supply of housing, the central Government strives to improve the effectiveness of housing development programs and maintain synergy with regional administrations, business circles and the communities, to utilize efficiently and effectively plots owned by regional administrations (provinces, districts and municipalities) to be used for simple but healthy homes and high-rise rented apartments; to simplify procedures to get permits; help to make access to financial institutions to obtain low-interest credits through a mortgage; and utilize foreign loans efficiently and effectively.

Scheme of Building One Million Homes

In supporting the scheme of building one million homes per annum during the period of 2004-2020, which was launched in October 2003, subsidies have been made available. Those homes, and high-rise apartments, simple but healthy to be occupied, are for people who still do not have their own homes or apartments with low income or unfixed earnings. The homes are of the sizes from 21 sq. meters to 36 sq. meters worth ranging from Rp21 million to Rp36 million per house.

For 2004, there are 27 banks ready to provide subsidies to finance the construction of 112,000 homes out of 200,000 homes being the target to be built in the year. In this context the Government allots Rp420 billion to subsidize the disparity of bank interest those banks should bear for the construction of 150,000 homes. The subsidies, provided under a mortgage system, are given to people with earning less than Rp1.5 million per

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month. It means they each get financial aid ranging from Rp2.4 million to Rp3.5 million, and credit interest of six percent to ten percent.

Also in 2004 the Government built 160,000 homes for civil servants, personnel of the Indonesian Armed Forces (TNI), and members of the Police to improve their living standard. Cross-subsidies along with their housing savings managed by a Housing Savings Supervision Agency will help finance the construction cost.

So far there are 101 district/municipal administrations willing to build homes for civil servants in their respective areas, of which 27 administrations have signed agreements with developers.

To pay the down payment of the housing construction, the agency earmarks about Rp 2.2 trillion. A 11-percent interest per annum is offered by the agency to housing developers. Every civil servant has the right to get a subsidized home credit on condition he or she has been a civil servant for five years and his or her age no more than 50 years.

The agency has set a target to set up 100,000 homes for civil servants, by maintaining cooperation with regional administrations and developers. During the past ten years, the agency has financed the construction of only 752,128 homes or averaging 75,000 homes per annum. To accelerate the supply of housing since 2002 the agency has offered housing builders loans under the Home Construction Loan Scheme, and the Home Down-Payment Loan Scheme for first-time home buyers. The total number of civil servants is 3.5 million, of whom 1.5 million have no homes of their own yet.

Development of Property

The past few years have seen a substantial growth in the property sector. In 2000, capitalization of national property projects swelled by 83.15 percent, from Rp5.58 trillion to Rp10.22 trillion. This sector was suffering a great loss when the country was hit by monetary crisis in the middle of 1997.

The trend of property business in 2003 was astonishing: it grew by 87 percent from Rp25.79 trillion in 2002 to Rp45.90 trillion in 2003. In the same year property business' contribution to the country's GDP was 2.34 percent. Following suit was the number of housing developers that increased from 1,000 establishments in 2002 to 1,300 establishments in 2003, or a rise of 30 percent.

Demand for property during the first quarter of 2004 showed a rise in many sectors. Demand for office space noted a rise of 160 percent or 220 sq. meters from 8,600 sq. meters during the final quarter of 2003 to 10,500 sq. meters in the first quarter of 2004.

The same trend occurred in rented apartment new-occupation when the number increased to 243 units during the first quarter of 2004, from 176 in the previous year. Cumulatively the number of rented apartments was 14,936 units. Condominium occupation grew at 83.1 percent, to reach 22,753 units out of 27,368 units having been constructed.

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Stimulating the rapid growth of property in 2003 was the decline of the SBI interest rate from 13.2 percent in 2002 to 10.3 percent at the beginning of 2003, making housing loan interest relatively lower or cheaper. It was followed suits by Bank Tabungan Negara (BTN-the State Savings Bank) that lowered its housing loan interest to 15 percent from previously 18 percent.

Women Empowerment

The government has arranged three programs on the position and role of women; they are:

• Women Life Quality Improvement Program, that is aimed at improving the position and roles of women as individuals, both as development human being and sources; as part of family setting up recent and future generations; as social being acting as agent of social change in all aspects of life and development.

• Women Empowerment Policy Suitability and Development Program that is aimed at realizing suitability in all policies of women empowerment in all fields of development.

• Empowerment of People's Role and Gender Mainstreaming Institutions Capability Program, that is aimed at improving the role and independency of institutions having the vision of women empowerment especially that of women organizations; strengthening active roles of the people in the efforts of enhancing women empowerment; developing the capacity and ability of government institutions in Improving gender mainstreaming in all phases of development process.

Some results of the programs of women life quality improvement in 2001-2004 include:

The Gender-related Development Index (GDI), which measures the quality of human development related to gender showing increased rank from 92 out 162 countries with index of values of 0.671 in 2001 to become rank of 91 out of 175 countries with index values of 0.678 in 2003.

In health development, the Government has increased the efforts to improve the quality and scope of health service to reduce high mortality rate of women delivering babies, especially in rural areas and slums in urban areas, through Love Mother Movement (GSI), Love Mother District, Love Mother Hospital, and Husbands Readiness-to-help Campaign. Other supporting programs are Developing Family of Children under Five years, Youth of Girl Movement, Working of Women Movement, and Breast Feeding Care Movement.

Through Family Planning Program, the exiting policy is directed to increase service of men to be able to actively participate in Family Planning Program, improving male contraceptive services, and developing family development approach with emphasis on health and reproduction rights.

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In education development, scholarship grant for girl students has decreased the number of drop-out girl students. The data from the National Socio-Economic Survey (SUSENAS) show that the percentage of literate women had increase from 91.4 percent in 2000 to become 92.9 percent in 2003.

Women's role in economic development showed the increase of women's work participation rate (TPAK) from 42.83 percent in 2001 to 44.81 percent in 2003 (SUSENAS 2001 and BPS 2003).

Some programs implemented to increase women empowerment in the economic sector are among others: Family Empowerment Program (PPK) with activities including productive economic business and infrastructures development that have been implemented in 20,000 villages, 187 districts, and 26 provinces (year of 2003). The efforts to improve women economic well-being has also involved the banking system, by establishing special working unit to handle credit for small and medium enterprises empowerment of the real sector of businesswomen, mapping of business, potential partnership, and financial relation facility (credit and saving) between businesswomen and banking.

In political development, a women caucus in parliament has been established to express women issues, and improve women involvement and awareness to participate in political activities. Law No.12 of 2003 concerning General Elections to Elect Members of the House of Representatives, the Regional Representatives Council, and the Regional Houses of representatives has given opportunity for women to participate more actively in political sector. The result of the 2004 General Election shows that women representation in the House of Representatives has reached 11 percent or an increase compared with 9 percent in previous General Election. In Regional Representatives, women politicians are about 19.8 percent. In executive institution, women in First and Second Echelon posts had increased from 9.9 percent in 2001 to become 13.25 percent in 2003.

To support public policy backing up gender mainstreaming, in the period of 2001-2004 the Government has conducted some studies concerning implementation of leave for women who deliver babies for women workers in the formal sector, opportunity to continue study for pregnant girl students, social insurance for women workers informal sector, and fight against people trafficking especially women and children.

In the field of women protection, the Government has implemented coordination and cooperation with related parties in arranging policy on women worker protection, including women migrant workers, protection to women trafficking victims, and protections to women as victims of household violence. To protect Indonesian workers, especially women workers who work abroad, some efforts have been implemented, such as establishment of services of Indonesian workers in receiving countries, improvement in protections agreement for Indonesian workers in receiving countries, improvement of recruitment process until departure, and preparation of bill on Indonesian Workers Placement Abroad.

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In relation with the effort to improve health, the Government has improved policies to expand and revitalize Love Mother Movement Plus, which includes health of new born babies and improvement of breast feeding, institutional management and network of the Love Mother Movement, public education on reproductions health, including HIV/AIDS, and development of gender equality and fairness in the field of reproductions health in family.

To cope with violence against women, in 2001 the Government together with people has built commitment through Declaration of Joint Commitment of Indonesian Country and People for Eradication for Violence against Women. Nowadays the Bill on Anti-Violence against Women that initiated by the House of Representatives has been passed.

The effort was followed by arrangement and implementation of the National Action Plan of Eradication of Violence against Women (RAN PKTP). To give protection and service to the victims of violence against women, the Government has established One-Stop Crisis Center in some big hospitals in 10 provinces. Since 2002 the efforts were extended by building crisis centers in some districts and 163 Specials Services Rooms in 19 Regional Police and Resort Police in some districts in Indonesia. Besides, the Government also held women detective training to cope with victims of violence against women involving policewoman from 21 Regional Police Commands in Indonesia.

To prevent and cope with the problems of trafficking in women and children, the Government has issued Presidential Decree Number 88 of 2002 on National Action Plan on Eradication of Trafficking in Women and Children and Presidential Decree Number 87 of 2002 on National Action Plan on Eradication of Commercial Sexual Exploitation of Children.

In the efforts to strengthen regional, provincial, and district/city institutions, the Government has established some working units dealing with women empowerment. To institutionalize the gender mainstreaming, the government has established the Forum of Gender Equality and Fairness (KKG) in national level, women empowerment institutions in all provinces and its initiative in 235 districts, focal points in 37 ministries and non-ministerial institutions, the Attorney General Office and Indonesian Police Headquarters. A number of 123 institutional networking of Women Study Centers (PSW) have been established to be able to actively participate in giving inputs to regional governments.

People participation in coping with the problems of women and children in refugee sites has proved to be helpful for victims of social conflicts. It was realized by establishing the Integrated Service Centers of Women Empowerment (P2TP2), which until 2003 stood in 7 provinces. To cope with pornography and porno action, the Government has drawn a Bill on Anti Pornography and Porno Actions.

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Youth, Sport, and Drugs Abuse Control

Taufik Hidayat, the only Indonesian athlete who grabs gold medal in Athens Olympic Games

Sports

In accordance with the direction of the Guidelines of State Policy and National Development Program 2000-2004, the development of sport is aimed to realize sports policy harmonization in various fields of development, to improve physical fitness of the people, and to improve the efforts to foster and guide prospective athletes since the early age.

The National Sports Committee of Indonesia (KONI) consists of members from various branches of sport divisions, of about 33 sports committee members at the provincial level.

In general, the national sports development policy is marked by some priority themes, that is that sports is an instrument of nation's integrity, vehicle for the process of value transformation of national culture, mastering the competency of social skills, and human intelligent forming in macro meaning, and creativity, and self confidence.

The XXIXth National Special Conference of KONI in Jakarta in 2004 has declared important pointers through its Work Programs, as follows:

• To make sports a means of national cohesion and unity in upholding national values and dignity in international fora.

• To support the birth of the Sport Act.

• To improve potential/talented young athletes development.

• To prepare the best Athletes in taking part in the 2004 Olympic Games in Athens.

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• To prepare the best Athletes to the event of the 2006 Asian Games.

• To prepare implementation of the 2004's XVI PON National Sport Games in Palembang, South Sumatra Province, and the 2008's XVII PON in East Kalimantan Province.

The "Indonesia Bangkit" Program

In line with the long-term development series of "Garuda Emas" (Golden Eagle), the Achievement Development Program of the Central KONI is focused on the successful implementation of the "Indonesia Bangkit" (Indonesia Rises) Program, especially in facing some international events namely the 2004 Olympic Games in Athens, the 2004 Paralympic Games in Greece, the 2005 Solidarity Games in Saudi Arabia, the 2005 First Indoor Asian Games in Bangkok, the 2005 Arafura Games 2005 in Darwin, Australia, the XXIII SEA Games 2005 in the Philippines and the 2006 ASIAN Games in Qatar.

The "Indonesia Bangkit" Program is a short-term program of the Central KONI in preparing Indonesian athletes contingent in some sports branches which has been predicted and evaluated to have potential to win gold medals in the 2004 Olympic Games in Athens, the 2005 SEA Games in the Philippines, and the 2006 Asian Games Qatar, namely the priority sports development in: badminton, archery, lawn tennis, athletics, cycling, chess, karate, sailing, beach volley, taekwondo, and weight lifting.

Training Center for Student Sportsmen (PPLP): These centers are located in 30 provinces, namely training center for 16 sports branches for regional, national, and international level. The sports branches are: fencing, pencak silat (martial arts), athletics, football, takraw, lawn tennis, archery, wrestling, rowing, table tennis, cycling, volley ball, diving, swimming, and boxing, and some of which are prepared for international level, namely fencing, athletics, football, takraw, archery, wrestling, diving, and boxing.

Training Center for Higher Learning Student Sportsmen (PPLM): These centers are located in seven provinces, namely in DKI Jakarta, West Java, Central Java, Special Territory of Yogyakarta, East Java, North Sumatra, and South Sulawesi. The centers are for sports development for regional and national level for athletics.

Anti-Doping Agency

As an effort to keep sportsmanship and values of sports out of bad actions damaging sports images, the Ministry of National Education has established the Indonesian Anti-Doping Agency (LADI) on August 6, 2004 in Jakarta, which consists of professionals, medical doctors and lawyers.

The LADI, was established as follow-up action of the anti-doping in sports declaration on March 3-5 2003, in Copenhagen, Denmark, as obliged by the World Anti-Doping Agency (WADA) established by the Montreal-based (Canada) International Olympic Committee (IOC) in 1999.

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For the short term, the LADI will socialize the existence of this agency and act as an official agency for the 2004's XVI PON in South Sumatra. And for the long term, the LADI will organize education for medical doctors in monitoring doping application.

Drugs Abuse Control

The rising trend of drug abuse, illicit production and trafficking remains one of Indonesia's serious problems and has become a national concern. Indonesia is indicated as one of the destinations for illicit drugs and producer of synthetic drugs, and facing much more serious illicit drugs and organized crime problems then ever before. In fact, within the past five years, the most serious aspects has been the rapidly rising incidence of HIV/AIDS among injecting drug users.

The Government focal point in Indonesia is The National Narcotics Board of Indonesia (NNB). As stipulated in Article 1 of Presidential Decision No. 17/2002, the NNB is directly under the President of the Republic of Indonesia, with the National Police Chief as the NNB Chairperson. It is supported by 25 government ministries and agencies. The NNB has the tasks to formulate and implement policies related to drug demand and supply reduction, at the same time to implement preventive and control measures and activities to prevent and eradicate the abuse of illicit trafficking in drugs through its Task Forces/TF composed of relevant government agencies. There are four TF's Centers of Prevention, Law Enforcement, Treatment & Rehabilitation, and Research & Development.

Non-Government Sector- "Badan Kerjasama Sosial Usaha Pembinaan Wargatama", known as BERSAMA is the Organization of Indonesia's Focal Point of Non-Government Agencies. As a coordinator agency, BERSAMA is an umbrella of all Indoensian non-government organizations/NGOs related or the agencies which have activities in drug abuse prevention, treatment facilities, rehabilitation centers and guidance & consultation programs. BERSAMA has also a special coordination forum in regional and international level.

On the other side, the Government has also revised Law Number 5 of 1997 on Psychotropic Substances and Law Number 22 of 1997 on Narcotics, and is expected to give firm and comprehensive law enforcement in facing drug problems in the country.

The facts above, however, do not and will not stop or discourage the Government of Indonesia in continuing to pursue its strong commitment in fighting against drug abuse, especially in implementation of DRUGS FREE ASEAN in the year of 2015.

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ENVIRONMENT

Development in the field of environment as it is envisaged in the 1999-2004 National Development Programs aims to exploit wisely and prudently natural resources for the benefits of the people by improving equitable and sustainable people's welfare in term of improved and healthy quality of environment.

It is realized that pressure against the environment is mounting up chiefly due to varied and different causes and interests. Excessive timber cutting and slash-and-burn farming system for instance have been bringing about high degree of forest destruction, making critical lands enlarge almost uncontrollably. Almost a similar situation happens at sea and under the sea. Reckless and irresponsible disposals of industrial and mining wastes to the sea in many places have already polluted those places, resulting in the destruction of coral reefs and other marine biota including fish species. A number of rivers and creeks or inlets particularly at urban areas are being polluted because of waste disposals from industries and households which have not yet been treated well by using modern method and sophisticated technology. High degree of pollution is also happening particularly at big cities due to primarily gas emission from motorized vehicles.

In addressing the problems, the Government, hand-in-hand with NGOs concerned with the issue, has made short-and long-term action plans and development schemes.

For long-term, relevant action plans have been formulated to include the arrangement of natural resources and environments balance sheet, studies on `green gross domestic products", studies on the application of green tax model, making draft of bill on natural resources management, studies on funding scheme through debt-for-nature swap (DNS) and clean development mechanism (CDM), and promotion of the role of communities in managing, controlling and monitoring natural resources.

For short-term environmental development, action plans are focused on schemes of: development and improvement of access to information on natural resources and environments; enhancement of effective natural resources management, conservation, and rehabilitation; protection and control of environments against destruction and pollution; institutional management and environmental preservation; and improvement of the role of community in natural resources management and environmental preservation.

Access to Information scheme

The scheme is aimed at disseminating complete and comprehensive information on potentiality and productivity of natural resources and environments after being inventoried and assessed and evaluated. By the scheme the public may have ample access to get information on natural resources and environments in form of spatial data, value and balance of natural resources and environments. The ideas of the scheme are that natural resources and environments as well as their supporting forces to be managed well and preserved for the benefits of the people's welfare from one generation to another, and that the country's economy to be developed on its comparative superiority as a maritime

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and agrarian state capable of producing superior products as output of every region within this country.

Under the scheme, it is sought out to improve information technology, one of the major lacks to intensify the implementation of action plans, to make all available resources, including those of maritime with its limited infrastructures and facilities as well as accessible data, identified properly.

As of 2001 a system of management information on environmental impact analysis has been put into operation, and its data are accessible to the public in the provinces of West Java, Central Java, Bali, Southeast Sulawesi, Papua, West Kalimantan, Central Kalimantan, and South Kalimantan. The establishment of website, which also caters public complains, and the publication of magazine "SERASI" both dealing chiefly with issues on environments, have been part of the scheme, and the implementation of Agenda 21. In addition, the 2000 State of Environment Report featured environmental situation and status in Indonesia.

There are also accessible data on evaluation of potentialities of forest resources, fresh water, sea waters, and minerals. Besides doing geological mapping and studies, inventories of mineral resources have also been done by composing or drawing varied maps, including geological and geophysical maps, composing data base of mineral and coal resources.

For 2002, various environment-related activities were carried out to make among other things data on non-informal mining undertakings and unlicensed mining undertakings, inventories on fresh water resources, and arrangements of maps of land water curves as a basis for of socio- economy, and natural resources spatial management. In attempts to protect national biological varieties, a concept of biological variety clearance house mechanism has been composed. The counting of natural resource balance has been conducted by doing experiments on benefits they can offer, and arranging balance of mineral and coal resources. Other activities included doing advanced inventories on mineral resources by systemic ocean geological mapping, examining South Sumatra and Kutai curves, making inventories on metal and non metal minerals, and inventories of coal and peat moss potentialities.

In 2003, data on natural resources and environments were updated. It included additional inventories of wild animals, data on sea sand at Riau Islands, data on potentialities of geothermal and renewable energies, environmental geological mapping and land water conservation.

Related activities worth recording in 2004 included the finding of several places identified as important habitats for protected species; the making available information on fertile fishing grounds for fishermen and cooperatives as well as fishing enterprises on regular basis; promotion of information system on integrated marine and fish farming developments; survey on marine geology at the Sunda Shelf, at part of the Malacca Strait, and at the seas of Riau, West Kalimantan and East Kalimantan; dissemination of

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information on potentialities of mineral resources, coal, peat moss, solid bitumen, geothermal, volcano, and underground waters; completion of geological and geophysical mappings, and geological and geophysical research and development in the field of geological catastrophes or calamities; improvement of volcano monitoring technology; arrangement of blue print of volcano catastrophic mitigation as the foundation for planning of national volcano mitigation system; and socialization of policies on geological calamity and potential geological calamity in Indonesia.

Management Effectiveness Scheme

This scheme underlines the urgent need for maintaining the balanced proportion between the utilization and preservation of natural resources and environment, with the aim of utilizing natural resources in efficient and sustainable way to meet the needs of industries for raw materials. The scheme is also sought out to make conservation areas being protected from any destruction as a consequence of excessive and uncontrolled exploitation. And improved utilization of natural resources and environment through natural resources conservation and rehabilitation by using environment-friendly technology has been what the scheme does require.

Meanwhile lingering unfavorable conditions to be addressed in implementing the scheme are among other things: the public's poor understanding on the importance and beneficial values of marine resources and sea fish species; lackluster law enforcement against offenses occurring in exploiting resources of sea fish, forestry, mining; unsmooth implementation of spatial management, and control of environmental pollution at marine and coastal ecosystem, forest areas, and mining areas; unbalanced proportion of fish stock distribution; and the yet-to-be optimum development of cultured fish farming and development of islets.

In cultivating and managing sea weed, cooperation with foreign institutions concerned with marine development continues to be maintained and promoted, such as those with the BILB of Germany and the CEVA of France, and with related organizations in the People's Republic of China, Thailand, and the Philippines in fish catching.

Under the conservation and rehabilitation scheme, reforestation areas have been expanded along with recovery of coral reef at several locations. In addition some preparation works have been going on for the designation of Kakaban Island in East Kalimantan as area of marine conservation, and Banda Island as the world's heritage site. Studies on environments and marine geological calamity at coastal areas and seas have been and are being conducted.

In the context of preventing and reducing the area of critical land, a 1,125 ha mangrove reforestation program has been carried out at Segara Anakan region, and regreening at Cikawung and Cimeneg river banks. The Government has also launched campaign scheme for reforestation of national forest and rehabilitation of critical lands covering a total area of 300,000 ha.

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In improving and maintaining marine biota, it has been endeavored to rehabilitate damaged coral reefs and implant artificial coral reefs, to develop national marine parks and marine conservation areas, conduct inventory on newly designated marine conservation areas by using marine ecosystem unit approaches, promotion of environment-friendly cultural system at damaged green areas through mangrove-fish farming, development of communal-based management of coastal areas and islets, and designation of geological protected areas and mining areas.

Prevention and Control Scheme

The scheme of Prevention and Control over environmental destruction and pollution aims to improve the quality of environments in a bid to prevent environmental pollution, and to recover spoiled environments due to excessive exploitation of natural resources and environment-unfriendly activities of industries and transport, to make the environment healthy, clean and fresh. It underlines the application of indicators enabling the preservation of renewable natural resources to avoid unrecoverable damages.

Attainable achievements made under the scheme have included investment in equipments to support preventive efforts of environmental pollution, provision of soft-loans to a number of companies to encourage them to use environment-friendly technology, the making of master plans for cleaner river program, socialization of environment-friendly technology for small-scale industrial undertakings, provision of designs for small-scale waste water disposal treatment installation rehabilitation, publication of directives to treat waste of oil and gas products, manuals to handle waste of chemical industries, of hotels and hospitals and many others.

Scheme for Institutional Arrangement and Law Enforcement

The main concern of this scheme are the development of environmental institutions, the arrangement of legal system and law enforcement to secure, preserve natural resources and environments and protect them from illegal practices or exploitation.

Pursuant to the 2000-2004 National Development Programs, the scheme stresses on gradual transfer of authority from central to regional administrations in managing natural resources and environments.

Achievements made under the scheme included the reviews and recomposing of various regulations and bills related to matters of natural resources and environments, the maintenance of cooperation between the government institutions concerned with environmental issues and non-government environmental organizations, domestic and overseas, in promoting the preservation of environments, promotion of status for a number of technical executing units under the Directorate for Forest Protection and Nature Conservation, the Ministry of Forestry, to be Natural Resources Conservation Offices and Offices of National Parks, and recomposing directives for the management of lakes, manuals for the management of land rehabilitation and land conservation,

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economic evaluation models for natural resources and environment, the documentation of fauna and flora identities per district and municipality, etc.

Improvement of Communal Role Scheme

The scheme aims to improve the role and awareness of parties concerned with prudent and wise management of natural resources and efficient and effective preservation of environment. The scheme gives emphasis on the greater utilization of natural resources and environments for the broadest possible benefits to the people without neglecting the preservation of function and balance they should hold.

In empowering members of the communities, training and up-grading courses have been organized, such as training to prevent and control destruction of mangrove forests, trainings for cultured mangrove-fish farming to develop a system of communal mangrove preservation. In addition, it has been sought out to involve members of the community in establishing partnership mode at river basins, partnership with gold miners at Gunung Pongkor, forum for ecosystem-based environmental management and many others.

DEFENCE AND SECURITY

Policy in the development of defense and security, as the 1999-2004 Guidelines of State Policy outlines, is more directed towards: (1) restructurization of the Indonesian Military pursuant consistently to its new paradigm through reposition, redefinition, and reactualization of the role the Military should play as the tool of the state to protect, maintain, and defend the unitary state of the Republic of Indonesia against any treat from within and outside by respecting human rights; (2) capability enhancement of the people's total defense and security system based on the might composing the society, military and police as the main elements, which is supported by other components to improve state defense; (3) the military professionalism improvement, and development of state defense and security might which is supported by appropriate facilities, infrastructures and budget; (4) expansion and intensification of bilateral cooperation in the field of defense and security in a bid to maintain regional defense and security stability, and to participate actively in maintaining the world's peace and order; (5) completing separation scheme of the Police from the Indonesian Defense Forces (TNI) and improvement of professionalism of the Police as the state instrument tasked to enforce law and order, to protect and guard the public.

Improvement schemes have been taking place at all components of the state defense might, with the defense forces and the police as its core, to strengthen the might and capability of defense and security.

Initiating systematic and well planned development of the defense and security components have been the arrangement and improvement of all related statutory regulations as the manifestation of the People's Consultative Assembly's Decree No. VI/MPR/2000 of 2000 on the separation of the Police from the Indonesian Defense Forces, Decree No. VIII/MPR/2000 of 2000 on the role of the Indonesian Defense Forces

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and the Police, Law No. 2 of 2002 on the Police of the R.I, and Law No. 3 of 2002 on State Defense.

Ever since the reformation era taking place, the country's defense and security system has undergone a substantial transformation. So have basic paradigms of the Indonesian Defense Forces as the mighty pillar in the defense system, and of the Police as the element to maintain security and order. The Military and the Police do not play their dual-function role (defense-security and social functions) any more. As of 2004, they cease their political role, and will have no more appointed representatives sitting at legislative bodies, but striving to be professional in their respective field and being credible.

With the country's very vast and rough geographical condition under its protection and surveillance while its personnel have to readjust their behavior-and mentality to the new paradigms, the TNI has been continuously repositioning its stand in shouldering the task and responsibility to defend the country and the nation. So do the Police to maintain security and order, to enforce law, and to give the public appropriate protection and services. By taking each role as the national defense guard and security guard the TNI and the Police are expected to be able to play a role in maintaining the nation's unity and integrity.

In developing and maintaining defense and security there have been adopted a number of development schemes grouped into main development schemes of state defense; supporting defense, public security and order maintenance, and domestic security promotion. To manage the schemes defense budget allocation for the year 2004 saw a 15 percent rise compared to that of 2003, namely from Rp11.536 trillion to Rp13,266 trillion. Of the total budget in 2004, Rp10.721 trillion were mostly allocated to finance the operational units and procurement and maintenance of defense equipment.

State Defense Development Scheme

The scheme is designed to build the might of state defense in proportional and gradual way in the context of establishing the mighty

President Megawati Soekarnoputri inspects parade during a commemoration of the State Defence anniversary day

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state defense which is professional, efficient, effective, and modern with high quality and mobility so that it can be deployed in a relatively short time to all corners of the country. It aims to maintain the capabilities and might of the Defense Forces, and improve the operations of their existing prime aims system to create a complete and credible might.

The country's defense policy covers the developments of system, personnel, equipment, and facilities materialized through development of the army, navy, and air force dimensions. The Government attaches high priority to making the most effective use of defense personnel and equipment to be capable of deterring enemies, rebels, and separatists.

The Army

As the defense might at land, the Army in 2004 (up to first quarter) had personnel totaling 274,061, consisting of 29,963 commissioned officers, 114,486 noncommissioned officers, and 129,612 lower noncommissioned officers.

To improve its military equipment, the Army has procured transport-combat MI-35 helicopters and personnel transport MI-17 helicopters, communication services night vision goggles (NVG), in addition to maintaining services of aircraft, combat vehicles, and artilleries. Besides, it has also pursued to retrofitting combat vehicles, and repowering canon dragging vehicles, as well as aircraft maintenance services to prolong their operational services.

The Navy

Commissioned to protect the country's waters, the Navy is developed to have mighty marine equipment and marine corps. The total number of the Navy's personnel up to first quarter of 2004 was 55,541, consisting of 7,567 commissioned officers, 23,356 noncommissioned officers, and 24,528 lower noncommissioned officers.

In improving its defense power, the Navy has procured KAL-12M type warships, and KAL-28M warships. It also plans to add its might by purchasing four corvettes from the Netherlands, and four landing platform deck (LPD) warships from South Korea.

Naval forces, while capable of operating through the country's territorial waters as required, are concentrating their operations around the Malacca Strait to the Natuna Sea. Naval operations are classified into: the prioritized operations safeguarding the Natuna Islands and the Sangihe-Talaud Islands; selected operations, protecting vital objects, and maintaining coordinative patrols with neighboring countries such as Malaysia, the Philippines, Singapore, and India; and preventive operations, deploying intelligent operations and clandestine operations; repressive operations, to launch anti-terror operation; Naval military supporting operations to support shifting of naval personnel deployment; and Police supporting operations, supporting operations at Maluku and Papua.

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The Air Force

With total personnel of 25,732 consisting of 6,548 commissioned officers, 11,871 noncommissioned officers and 7,313 lower noncommissioned officers and a number of combat and non-combat aircraft as well as other supporting equipment the Indonesian Air Force fulfils various operational roles to protect and secure air defense.

The Indonesian Air Force' might consists of 15 air squadrons, three training squadrons, 16 radar squadrons, six "Special Force" squadrons, seven technical squadrons, and seven maintenance depo squadrons.

In improving its might, the Air Force continues to procure new aircraft to enhance air defense including the introduction into service of 16 Hawk 2000 aircraft, four Sukhoi (two SU-30 and two SU-27) combat aircraft, and 16 NAS-332 aircraft and three CN-235 KPA aircraft, 12 Colebri EC-120 trainer helicopters, and seven KT-1 trainer aircraft. It is also continuing the repair program of F-16 aircraft, and overhauls of Puma SA-330 helicopters.

Supporting Defense Scheme

The scheme is designed to make the use of modern management more professional, and to improve the capabilities of promoting and utilizing state territory, conducting national surveys and mapping, and maintaining international cooperation in the field of defense.

The scheme underlines the importance of good management of human resources, natural resources, and artificial resources to help the organization of state defense. Parallel with the organization of state defense, promotion and nurturing awareness of any Indonesian citizen's responsibility to participate actively in state defense have been conducted by empowering social organizations.

In maintaining the unity of the Republic, various activities have taken place, including surveys on and determination of borderlines with Malaysia (at Kalimantan-Sabah border), with Papua New Guinea, and with Timor Leste, and international military cooperation with members of ASEAN, and countries at the Asia-Pacific region in the context of maintaining regional as well as international security stability.

Scheme of Security and Order Maintenance

The main aim of this scheme is to realize the organization of security and order system to enable the system to protect the public from any disorder and disturbances, pursuant to the operative statutory regulations. Under the scheme, it has been always pursuing the improved professionalism and readiness of the police to uncover any case, and the developed might of the Police, including the ratio between the number of the police personnel and the number of the public to serve.

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In promoting the Police might seven basic conceptions have been introduced to promote the Police's self-reliance. The conceptions are on the Police doctrine and ethics, logistics, personnel and training operation, management, budget, and on legal affairs and statutory regulations.

Various trainings continue to be organized for the Police personnel, either at home or abroad, to improve their professionalism, in addition to tightening the control and upholding discipline of the personnel in doing their jobs as well as to impose reward-and-punishment system.

It has been always pursued to maintain the operative quality of their rather out-of-date equipment, such as communications devices, motorized vehicles, aircraft and helicopters, etc.

Pursuant to Presidential Decree No. 70 of 2002, the Police have set up a Security Intelligence Agency tasked to deal with state security and safety and to give input to the State Intelligence Agency that handles any threat from inside and outside.

It is the priority concern of the Police to maintain and restore security and order in some conflict-torn areas such as in Aceh, Papua, and Maluku, and to hunt down and arrest the doers and masterminds of bomb attacks.

In fighting against drugs, including drugs trafficking, the Police established in 2002 the National Drugs Agency with the authorities to formulate policies, strategies on the eradication of drugs trafficking, and to carry out programs of preventive actions therapies and law enforcement against drug users and traffickers. Under the drugs operations launched during the first quarter of 2004 the Police had succeeded in uncovering 795 cases of illegal use and trafficking of drugs that involved 1,077 suspects including 14 foreigners. Some 2,293,460 grams of narcotic substance, 862,671.5 tablets and 488 bars were seized.

Domestic Security Development Scheme

Improved capability in safeguarding the national legal territory, and in handling domestic security disturbances by deploying all components of the state security might is the main aim of the scheme. The scheme is also directed towards the creation of a system that promotes cooperation between the Police and the Indonesian Defense Forces as well as related bodies in facing security troubles threatening the unity and integrity of the nation. Steps taken under the scheme are to uphold and maintain law enforcement, and take strict actions against rioters, including bomb attackers in the Kuta-Bali, J.W. Marriot Hotel, Kuningan (in front of the Australian Embassy) bloody incidents.

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Security Problems

The most serious problems in the field of security the Indonesian Government is currently coping with are the armed separatist movement in parts of the Provinces of Papua and Nanggroe Aceh Darussalam, and terrorism.

Aceh

In dealing with the issue of Aceh, the government has exerted every effort to settle the issue through a peaceful way by holding dialogues and negotiations with the Aceh armed separatist movement. These included endeavors to hold the Joint Council Meeting (JCM), which was properly speaking to be held in Geneve, Switzerland, on April 25, 2003.

The meeting failed to be held, but then another could be convened on May 18, 2003 in Tokyo, but only to come to a deadlock.

The failure to reach an agreement with the separatist movement led to the issuance of Presidential Instruction No. 28 of 2003 concerning the State of Emergency with the Status of Material Law in the Province of Nanggroe Aceh Darussalam.

This military emergency measure has been the last choice after exhausting a series of peace efforts by the government, be it through the granting the province with the status of special autonomy, concerted approaches in more comprehensive development plans, or dialogues held abroad. But neither could halt the intention and action of the Aceh armed separatist movement to secede from the Unitary State of the Republic of Indonesia.

The implementation of the status of martial law takes in the form of a concerted approach by carrying out humanitarian operation, law enforcement and empowerment of the public administration, in addition to a security restoration operation.

The implementation of the status of martial law has been viewed successful since it has succeeded in reducing room for action of the armed separatist movement, and granting the majority of Aceh people an improved feeling of security and protection.

Papua

Law No. 21 of 2001 on Special Autonomy Status for Papua constitutes the best compromise for a peaceful, modern and civilized life in the Province within the Unitary State of the Republic of Indonesia. Substantially the law governs almost all life aspects of the local communities, allows ample room to actualize political life and economic growth and others related to the principles of justice and rights of the local people.

In early 2003, there was issued Presidential Instruction No. 1 of 2003 on the acceleration of the implementation of Law No. 45 of 1999 on Formation of the Province of Central Irian Jaya, the Province of West Irian Jaya, and the Districts of Paniai, Mimika, Puncak

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Jaya, and Sorong. The instruction is the policy to improve the management of administrative affairs and public services.

Terrorism

The tragedy of Bali bombings on October 12, 2002, not to mention a string of bombings in other sites including the J.W. Marriott Hotel in Jakarta, claimed not only hundreds of lives and untold material damage but also brought about negative impacts to either the Bali Island's and Indonesia's tourism industries or the country's economic development. This tragedy was noted in the Agenda of the UN Security Council in Resolution No. 1438 dated October 14, 2002, as an international terrorist action.

Aware of the terrorist actions of having always caused horrible consequences, major casualties and indiscriminate destruction, there are no other ways then to condemn them and at the same time to fight against and eradicate them. In line with this, the Indonesian government among other things has issued Government Regulation in lieu of Law No. 1 of 2002 concerning Eradication of the Crimes of Terrorism and Government Regulation in lieu of Law No. 2 of 2002 on the application of Government Regulation in lieu of Law No. 1 of 2002 on the Bali bombings. In their later development the two regulations have been adopted and promulgated as Law No. 15 of 2003 and Law No. 16 of 2003, which give strong legal foundation to fight against terrorism. The issuance of Law No. 15 of 2003 and Law No. 16 of 2003 (though it was then nullified through a judicial review by the Constitutional Court) showed that the Government and the Indonesian nation have a strong commitment to persistently fight against terrorism, and will never surrender. For that, the government is going to maintain close cooperation with other countries in the fight against terrorism, both in bilateral and multilateral framework.

In addition, the government keeps on improving the mechanism of terrorism eradication, and intensifying early detection efforts and deterrent actions.

Meanwhile, the Indonesian Police deserve to be given thumbs up for their successes to uncover, capture and detain terrorist suspects, who had waged a series of terrors, including the Bali blasts, in a relatively short time. Now some have even been sentenced to death and life imprisonment.

The trial process of the Bali blasts, for instance, has been an indication to some extent of the success of the government in coping with anarchies committed by a group of people suspected of having connection with international terrorist networks.

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